A 11/2009
Market Entry Strategies and
Confronted Barriers on
Liberalized Railway Freight
Markets in Sweden and Poland
Milla Laisi
Publications of the Finnish Rail Administration
A 11/2009
Market Entry Strategies and Confronted Barriers on Liberalized
Railway Freight Markets in Sweden and Poland
Milla Laisi
Helsinki 2009
Finnish Rail Administration
Publications of the Finnish Rail Administration A 11/2009
ISSN 1455-2604
ISBN 978-952-445-301-1
Internet (pdf) (www.rhk.fi)
ISSN 1797-6995
ISBN 978-952-445-302-8
Cover: Proinno Design Oy, Sodankylä
Photo: LKAB archives
Imprint: Kopijyvä Oy, Kuopio
Helsinki 2009
3
Laisi, Milla: Market Entry Strategies and Confronted Barriers on Liberalized Railway
Freight Markets in Sweden and Poland. Finnish Rail Administration, Traffic System
Department. Helsinki 2009. Publications of the Finnish Rail Administration A 11/2009. 122
pages and 9 appendices. ISBN 978-952-445-301-1, ISBN 978-952-445-302-8 (pdf), ISSN 14552604, ISSN 1797-6995 (pdf)
Keywords: barriers to entry, market deregulation, market entry, Poland, Sweden, railway
freight transport, railway undertaking
ABSTRACT
Globalization has increased transport aggregates’ demand. Whilst transport volumes
increase, ecological values’ importance has sharpened: carbon footprint has become a
measure known world widely. European Union together with other communities
emphasizes friendliness to the environment: same trend has extended to transports. As a
potential substitute for road transport is noted railway transport, which decreases the
congestions and lowers the emission levels. Railway freight market was liberalized in
the European Union 2007, which enabled new operators to enter the markets.
This research had two main objectives. Firstly, it examined the main market entry
strategies utilized and the barriers to entry confronted by the railway undertakings who
entered the markets after the liberalization. Secondly, the aim was to find ways the
Infrastructure Manager could enhance its service towards potential railway freight
undertakings. Research is a qualitative case study, utilizing descriptive analytical
research method with a normative shade. Empirical data was gathered by interviewing
Swedish and Polish railway freight undertakings by using a semi-structured themeinterview. This research provided novel information by using first-hand data; topic has
been researched previously by utilizing second-hand data and literature analyses.
Based on this research, rolling stock acquisition, needed investments and bureaucracy
generate the main barriers to entry. The research results show that the mostly utilized
market entry strategies are start-up and vertical integration. The Infrastructure Manager
could enhance the market entry process by organizing courses, paying extra attention on
flexibility, internal know-how and educating the staff.
4
Laisi, Milla: Markkinoilletulostrategiat ja kohdatut markkinoilletulon esteet vapautetuilla
rautatietavaramarkkinoilla Ruotsissa ja Puolassa. Ratahallintokeskus, Liikennejärjestelmäosasto. Helsinki 2009. Ratahallintokeskuksen julkaisuja A 11/2009. 122 sivua ja 9 liitettä. ISBN
978-952-445-301-1, ISBN 978-952-445-302-8 (pdf), ISSN 1455-2604, ISSN 1797-6995 (pdf)
Avainsanat: markkinoilletulon esteet, markkinoiden avautuminen, markkinoilletulo, Puola,
rautatietavaraliikenne, rautatieyritys, Ruotsi
TIIVISTELMÄ
Globalisaatio on lisännyt kuljetuskokonaisuuksien kysyntää. Volyymien kasvaessa
ekologisten arvojen merkitys on kasvanut; hiilijalanjäljestä on tullut kaikkien tuntema
mittari. Euroopan Unioni yhdessä muiden yhteisöjen kanssa painottaa ympäristöystävällisyyttä: trendi on jo levinnyt kuljetuksiinkin. Maantiekuljetuksille potentiaalisena vaihtoehtona on nähty rautatieliikenne, joka vähentää ruuhkia sekä on vähäpäästöisempi. Rautatietavaraliikenne avattiin kilpailulle Euroopan Unionissa vuoden
2007 alussa, joka mahdollisti uusien toimijoiden tulon markkinoille.
Tutkimuksella oli kaksi tavoitetta. Tarkoituksena oli tutkia operaattoreiden käyttämiä
markkinoilletulon strategioita ja markkinoilletuloon liittyviä esteitä sekä löytää tapoja,
jolla valtion virasto voisi edesauttaa uusien operaattoreiden markkinoilletuloa. Tutkimus
on kvalitatiivinen tapaustutkimus, ja siinä käytettiin kuvailevaa tutkimustapaa normatiivisella vivahteella. Empiirinen aineisto kerättiin haastattelemalla ruotsalaisia sekä
puolalaisia rautatietavarayrityksiä käyttäen puoli-strukturoitua teemahaastattelua.
Tutkimus toi markkinoille uutta tietoa käyttämällä ensi käden tietoa; aihetta on aiemmin
tutkittu toisen käden tiedon sekä kirjallisuusanalyysien kautta.
Tutkimuksessa tehtyjen havaintojen mukaan merkittävimmät markkinoilletulon esteet
ovat kaluston hankinta, tarvittavat investoinnit sekä byrokratia. Käytetyimmät
markkinoilletulostrategiat ovat uuden yrityksen perustaminen (vanhan valtiollisen
yrityksen pohjalta) sekä vertikaalinen integraatio. Valtion virasto voisi edesauttaa
markkinoilletuloa järjestämällä kursseja, lisäämällä joustavuutta, sisäistä tieto-taitoa
sekä panostamalla työntekijöiden koulutukseen.
5
Laisi, Milla: Strategier för marknadsintroduktion och påträffade hinder för marknadsintroduktion inom de avreglerade marknaderna för järnvägsgods i Sverige och Polen.
Banförvaltningscentralen, Trafiksystemsavdelningen. Helsingfors 2009. Banförvaltningscentralens publikationer A 11/2009. 122 sidor och 9 bilagor. ISBN 978-952-445-301-1, ISBN
978-952-445-302-8 (pdf), ISSN 1455-2604, ISSN 1797-6995 (pdf)
Nyckelord: hinder för marknadsintroduktion, avreglering av marknaden, marknadsintroduktion,
Polen, godstrafik på järnvägen, järnvägsföretag, Sverige
SAMMANDRAG
Globaliseringen har ökat efterfrågan på helhetstransporter. Då volymerna ökar, ökar
också innebörden av de ekologiska värderingarna; koldioxidavtrycket har blivit en
mätare som alla känner till. Europeiska unionen betonar miljövänlighet tillsammans
med andra samfund: trenden har redan spritt sig till transporterna. Järnvägstrafiken har
setts som ett potentiellt alternativ till landsvägstransporterna, då den minskar på
rusningar och ger upphov till mindre utsläpp. Godstrafiken på järnvägen avreglerades
inom EU i början av år 2007 och gjorde det möjligt för nya aktörer att komma in på
marknaden.
Undersökningen hade två mål. Avsikten var att undersöka de strategier som aktörerna
använde för sin marknadsintroduktion och hinder relaterade till marknadsintroduktionen
samt finna sätt varpå det statliga ämbetet kunde befrämja nya aktörers marknadsintroduktion. Undersökningen var en kvalitativ fallstudie som använde sig av ett
beskrivande forskningssätt med en normativ nyans. Det empiriska materialet insamlades
genom att intervjua svenska och polska järnvägsgodsföretag genom en halvstrukturerad
temaintervju. Undersökningen gav marknaden ny information genom att använda sig av
förstahandsinformation; ämnet har tidigare undersökts genom andrahandsinformation
och litteraturanalyser.
Baserat på de observationer som gjordes i undersökningen var de största hindren för en
marknadsintroduktion anskaffning av materielen, nödvändiga investeringar och
byråkratin. De mest frekventa strategierna för marknadsintroduktion var att grunda ett
nytt företag (baserat på ett gammalt statligt företag) samt vertikal integration. Det
statliga ämbetet kunde befrämja marknadsintroduktionen genom att anordna kurser, öka
flexibiliteten och den interna expertisen samt genom att satsa på utbildning av de
anställda.
6
FOREWORD
This work was done for Lappeenranta University of Technology’s and St. Petersburg
State University’s MITIM-program (Master in International Technology and Innovation
Management) and it was ordered by the Finnish Rail Administration. Research was
done by undergraduate Milla Laisi. At the same time work is writer’s Master’s Thesis
for the double master’s degree between Finland and Russia.
Work was examined by professors Olli-Pekka Hilmola and Olli Kuivalainen from
Lappeenranta University of Technology and Professor Yury E. Blagov from Graduate
School of Management. The mentors from the Finnish Rail Administration were
Director Miika Mäkitalo and Senior officer Kaisa-Elina Porras.
Helsinki, September 2009
Finnish Rail Administration
Traffic System Department
7
TABLE OF CONTENTS
ABSTRACT ..................................................................................................................... 3 TIIVISTELMÄ ................................................................................................................. 4 SAMMANDRAG ............................................................................................................. 5 FOREWORD .................................................................................................................... 6 ABBREVIATIONS .......................................................................................................... 9 LIST OF FIGURES ........................................................................................................ 10 LIST OF TABLES ......................................................................................................... 12 1 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 INTRODUCTION .................................................................................................. 13 Background of the research and research gap ......................................................... 13 Objectives of the research and research problem .................................................... 15 Literature review ..................................................................................................... 16 Theoretical framework ............................................................................................ 18 Delimitations ........................................................................................................... 19 Definitions of the key concepts .............................................................................. 20 Research methodology ............................................................................................ 21 Structure of the research .......................................................................................... 22 2 2.1 2.2 2.3 2.4 2.5 RAILWAY FREIGHT MARKET AND MARKET DESCRIPTION ................... 24 History ..................................................................................................................... 24 European Union ....................................................................................................... 26 Sweden .................................................................................................................... 29 Poland ...................................................................................................................... 34 Finland ..................................................................................................................... 37 3 3.1 3.2 3.3 3.4 MARKET ENTRY AND BARRIERS TO ENTRY .............................................. 39 Competition and different forms of markets ........................................................... 39 Market entry barriers ............................................................................................... 41 Market entry strategies ............................................................................................ 43 Tools and framework to analyze industry ............................................................... 48 3.4.1 Strategic groups .......................................................................................... 48 3.4.2 Porter’s five forces ..................................................................................... 52 4 4.1 4.2 4.3 TRANSPORT INFRASTRUCTURE .................................................................... 56 Sweden .................................................................................................................... 58 Poland ...................................................................................................................... 58 Finland ..................................................................................................................... 59 5 5.1 5.2 5.3 5.4 RESEARCH ENVIRONMENT AND DATA GATHERING ............................... 63 Research approach ................................................................................................... 63 Theme interview ...................................................................................................... 64 Collecting the data ................................................................................................... 64 Methods used to analyze the research data.............................................................. 66 8
6 EMPIRICAL PART ............................................................................................... 67 6.1 Sweden .................................................................................................................... 67 6.1.1 Market entry ............................................................................................... 68 6.1.2 Market entry barriers .................................................................................. 73 6.1.3 Infrastructure .............................................................................................. 74 6.1.4 The Swedish Rail Administration, Banverket ............................................ 77 6.2 Poland ...................................................................................................................... 81 6.2.1 Market entry ............................................................................................... 83 6.2.2 Market entry barriers .................................................................................. 88 6.2.3 Infrastructure .............................................................................................. 89 6.2.4 The Polish Rail Administration, PKP PLK ................................................ 92 7 7.1 7.2 7.3 7.4 RESEARCH RESULTS – COMPARISON BETWEEN SWEDEN AND
POLAND ................................................................................................................ 97 Market entry ............................................................................................................ 97 Market entry barriers ............................................................................................... 98 Infrastructure .........................................................................................................101 The Rail Administration ........................................................................................ 103 8 8.1 8.2 8.3 8.4 CONCLUSION .................................................................................................... 105 Summary and main findings .................................................................................. 105 Theoretical implications ........................................................................................ 109 Managerial implications ........................................................................................ 110 Limitations and suggestions for future research .................................................... 110 REFERENCES ............................................................................................................. 112 APPENDICES
Appendix 1 Cover letter and introduction letter in Swedish
Appendix 2 Cover letter and introduction letter in English
Appendix 3 Semi-structured questionnaire
Appendix 4 Frågeformulär enligt halv-strukturell metodik
Appendix 5 Interviewees in Sweden
Appendix 6 Sweden: New entrants/freight transport
Appendix 7 Poland: New entrants/freight transport
Appendix 8 Company details Sweden
Appendix 9 Company details Poland
9
ABBREVIATIONS
EIU
The Economist Intelligence Unit
ERTMS
European Rail Traffic Management System
FCL
Full container load
GDP
Gross-domestic product
LCL
Less than container load
OECD
Organization for Economic Co-operation and Development
PKP PLK
PKP Polskie Linie Kolejowe (PKP Polish Railway Lines)
RNE
RailNetEurope
TEU
Twenty-foot container load
(Respectively, 2 TEU = Forty foot container load)
Tkm
tonne-kilometre
WTO
World Trade Organization
10
LIST OF FIGURES
Figure 1
Figure 2
Figure 3
Figure 4
Figure 5
Figure 6
Figure 7
Figure 8
Figure 9
Figure 10
Figure 11
Figure 12
Figure 13
Figure 14
Figure 15
Figure 16
Figure 17
Figure 18
Figure 19
Figure 20
Figure 21
Figure 22
Figure 23
Figure 24
Figure 25
Figure 26
Figure 27
Figure 28
Figure 29
Figure 30
Figure 31
Figure 32
Figure 33
Figure 34
Figure 35
Figure 36
Figure 37
Figure 38
Figure 39
Figure 40
Theoretical framework .......................................................................................... 18
Independent, dependent and controlled factors ..................................................... 19
Structure of the thesis ............................................................................................ 23
LIB Index 2007, country division (Adapted from the Rail Liberalization Index,
2007)...................................................................................................................... 29
Key stakeholders in the Swedish railway industry (Wolf, H & Stenbacka,
H 2009, pers. comm., 8 May) ................................................................................ 31
Key stakeholders in the Polish railway industry (Adapted from Steer Davies
Gleave Poland, 2003; Wrobel, J 2009, pers. comm., 21 April) ............................. 34
Market shares in Poland / PKP Cargo versus private undertakings
(Adapted from ZDG TOR, 2009). ......................................................................... 36
Operators in the Finnish Railway sector (Mäkitalo, 2007, p. 21).......................... 37
Correlation between market strategies and barrier to entry (Adapted from
Pehrsson, 2009) ..................................................................................................... 44
Porter’s five forces adapted to railway freight transport (Adapted from
Mäkitalo, 2007; Porter, 1980) ............................................................................... 53
The assumed transport activity growth during 1990–2030, index 100 = 1990
(European Union, 2007) ........................................................................................ 57
The use of different transport modes (European Union, 2008) ............................. 57
Goods transported by railway / Sweden (SIKA Institute, 2008) ........................... 58
Transported goods by mode of transport in Poland 2007
(Central Statistical Office, 2008) ........................................................................... 59
Goods transported by railway in Finland, excluding Russian traffic
(RHK, 2008) .......................................................................................................... 60
Gauge in Northern Europe (RHK, 2006)............................................................... 61
Background before entering railway freight market / Sweden .............................. 68
Turnover / market leader versus other railway undertakings / Sweden................. 69
Turnover and personnel / interviewed railway undertakings (excluding market
leader) / Sweden .................................................................................................... 69
Reason for market entry / Sweden......................................................................... 70
Market entry barriers / Sweden ............................................................................. 73
Intermodal / Intramodal competition in Sweden ................................................... 74
Interviewed railway undertakings’ market areas / Sweden (excluding the
incumbent) ............................................................................................................. 76
Cooperation with Banverket .................................................................................. 78
Swedish railway undertakings’ opinion about the Network Statement ................. 79
The Network Statement usage ............................................................................... 80
Background before entering railway freight market / Poland ............................... 83
Personnel / market leader versus other interviewed railway undertakings /
Poland .................................................................................................................... 84
Reason for market entry / Poland .......................................................................... 85
Market entry barriers / Poland ............................................................................... 88
Intermodal / intramodal competition in Poland ..................................................... 89
Railway undertakings’ market areas / Poland ....................................................... 90
Correlation between variables (*estimation) (CTL Logistics, 2009) .................... 91
Cooperation with PKP PLK .................................................................................. 93
Polish railway undertakings’ opinion about the Network Statement .................... 94
The Network Statement usage / Poland ................................................................. 94
Infrastructure charge triangle (CTL Logistics, 2009) ............................................ 95
Backgrounds of the interviewed railway undertakings ......................................... 97
Market entry barriers in Sweden and Poland......................................................... 99
Intermodal / intramodal competition in Sweden and Poland............................... 101
11
Figure 41
Figure 42
Figure 43
Figure 44
Cooperation between railway undertakings in Sweden and Poland .................... 102
Railway undertakings’ opinion about the infrastructure in Sweden and Poland . 103
Railway undertakings’ satisfaction level / Infrastructure Manager ..................... 104
The Network Statement utilization ...................................................................... 104
12
LIST OF TABLES
Table 1
Table 2
Table 3
Table 4
Table 5
Table 6
Table 7
Table 8
Table 9
Table 10
Table 11
Table 12
Table 13
Table 14
Table 15
Table 16
Table 17
Table 18
Table 19
Table 20
Table 21
Table 22
Table 23
Impact of liberalization of railway freight market in Germany, UK, US and
expected impact within EU (Profillidis, 2004, p. 272) .............................................. 26
Swedish railway freight railway undertakings’ turnover during 2005–2007/
thousand SEK (Järnvägsstyrelsen, 2008) ................................................................... 33
Structure of transport performance in 2008, private railway undertakings
(Adapted from ZDG TOR, 2009) .............................................................................. 36
Market structure (Adapted from Baye, 2005 & Begg et al., 1994; 157).................... 40
Authors’ definitions of “barriers to entry” (Adapted from McAfee et al., 2004,
461–463; von Weizsäcker, 1980, 13) ........................................................................ 42
Factors having an effect on market entry mode selection (Adapted from Koch,
2001) .......................................................................................................................... 45
Sources of mobility barriers (Adapted from McGee & Thomas, 1986, 151) ............ 50
Five railway strategies by Smith and Grimm (Adapted from Smith & Grimm,
1987, 369 – 372) ........................................................................................................ 51
Barriers to entry (Porter, 1980, p. 7–13) .................................................................... 54
Network length in countries concerned (Banverket, 2009; PKP PLK, 2009;
RHK, 2009)................................................................................................................ 56
Interviews in Sweden: time, date and duration .......................................................... 65
Interviews in Poland: time, date and duration ........................................................... 65
Main findings / Sweden ............................................................................................. 67
Railway undertakings’ strengths and weaknesses ..................................................... 71
Railway undertakings’ comments concerning drivers and personnel in general /
Sweden ....................................................................................................................... 72
Amount of locomotives per railway undertaking / Sweden ....................................... 73
Swedish railway undertakings’ comments concerning the Network Statement;
positive and negative matters ..................................................................................... 79
Change from monopolistic market to liberalized market / Sweden ........................... 81
Main results / Poland ................................................................................................. 82
Polish railway undertakings’ strengths and weaknesses ............................................ 86
Railway undertakings’ comments concerning drivers and personnel in general /
Poland ........................................................................................................................ 87
Locomotives types per railway undertaking / Poland ................................................ 87
Change from monopolistic market to liberalized market / Poland ............................ 96
13
1
INTRODUCTION
This study examines the phases of entering a railway freight market after a deregulation
process. The main focus is on market entry strategies and barriers to entry. The entry
process is examined in two countries, Sweden and Poland, countries that deregulated the
railway freight markets before legislative demands of the European Union. In addition,
study assembles notions how the Infrastructure Manager could enhance its service
towards new entrants of railway freight market. The research is The Finnish Rail
Administration’s project, done at Lappeenranta University of Technology’s Kouvola
Unit.
1.1
Background of the research and research gap
The field of transportation has changed dramatically during the centuries. Globalization
increases demand towards more specialized transport aggregate. Countries’ equity ratio
can not guarantee all products needed, which sets pressure on transportation; it has a
key role in economic activity. As Quinet and Vickerman (2004) states, transport is a
sector of economic activity, which actuates to national output. Increased inputs in
process of production enhance demand for transportation. According to World Trade
Organization’s (WTO) survey (WTO, 2008), exports of world transportation services
amounted $ 750 billion in 2007, stating 19 per cent increase compared to nine per cent
increase in 2006. In 2007 European Union member states’ transport accounted for
around six per cent of the GDP (Eurostat Transport, 2009). Freight transport by inland
modes (road, railway, inland waterways and oil pipelines) increased in EU 27 countries
by five per cent in 2006 compared with 2005, attaining 2 595 billion tkm1 (Eurostat,
2009).
The main transportation modes are air, railway, road and sea. Air service started in
Europe during 1920s; cargo traffic developed slowly but it has increased the market
share annually. Eurostat statistics show 14.5 per cent increase between years 2004 and
2007. Railway traffic leads back to late 1700s and early 1800s, when steam engines
were developed into working entities. During the early days railway was used to
transport bulk cargo2, for example in UK the wagonway was constructed in order to
transport coal from mines to canal, where it was transferred to vessels and transported
onwards (Schivelbusch, 1996, 7-12). Railway transport has lost its market share during
the decades. In 1950s railway transportations market share was 60 per cent (Vassallo &
Fagan, 2005). According to Eurostat (2009), in 2008 the market share in Europe was 10
per cent.
The considerable increase in transportation has unfolded in road transport. In 2007 road
transports’ stake was 76.9 per cent, which is three percentage units larger than in 2000
(Eurostat, 2009). Although waterway is among the main modes in international
transportation, in Europe it represents a minor role with six per cent market share
(Eurostat, 2009). Due to its nature the strength is in moving large quantities with
relatively low price.
1
Tkm = tonne-kilometre; unit of measure representing movement of one tonne of freight over one
kilometre
2
Bulk cargo = cargo which is transported unpackaged in large quantities
14
Increased need for transport creates many complications in the society. By courtesy of
road transports’ increasing market share, many nations have elaborated actions in order
to distribute transport load to various modes. Whilst transport volumes increase,
ecological values’ importance has increased: carbon footprint has become a measure
known world widely. European Union together with other communities emphasizes
environmentally friendliness: same trend has extended to transports. As a potential
choice for road transport is seen railway transport, which decreases the congestions and
enables lower level of emissions. One of the actions was introduced in 1991, when
European Directive 91/440 was launched. Later on many White Papers, directives and
legislations prepared the way for European railway freight traffics’ deregulation, which
came into force in 2007. (European Union, 2009)
For decades railway transport has been seen as a prospective rival for road transport.
Railway offers cost-effective transport without obstructing the traffic. In long-distance
corridors railway can displace other modes: for example, by using Trans-Siberian3
Railway the distance from Japan to Helsinki would decrease by an impressive 58 per
cent! (European Union, 2009; Hilletofth et al., 2007) Although The RailNetEurope
(RNE) tries to harmonize the conditions and procedures in the field of international
railway freight traffic, market faces several problems. Countries have own electricity
systems, which constrain the possibility to transport goods through various countries,
although those would have same gauge. Every country requires own documents,
certificates, procedures and safety systems, which must be fulfilled before operations
can be enlarged outside internal borders. Liberalization of railway freight transport has
enabled new entrants to enter the previously monopolistic markets. Competition is seen
to decrease price level, increase the service culture and offer new routes.
(RailNetEurope, 2009)
Few European countries have opened the railway freight markets before legislative
demands of the European Union. Among the first ones were United Kingdom and
Sweden. The process in UK was a short-term failure, but Sweden set an example market
can be deregulated in a profitable manner. Sweden opened the markets in 1990s and
today the railway freight market has dozens of railway undertakings. Poland deregulated
the markets in 2000, four years before joining the European Union. As in Sweden,
Polish market has today several railway undertakings; the market shares differ from a
massive market leader to minor railway undertakings with few per cents’ market share.
Rallying point in both countries is a fact the earlier monopoly company still runs the
markets: in Sweden the former monopolistic undertaking has more than 75 per cent
market share!
Finland opened the markets in 2007, when freight traffic monopoly was terminated due
to European Union’s legislation. However, VR Cargo, the old Finnish State Railways
(Valtionrautatiet, VR) is still the only railway undertaking. So far two companies have
announced interest towards entering the Finnish markets. According to Helsingin
Sanomat (2007) and Iisalmen Sanomat (2009), TR Group is planning on entering the
freight markets in 2010. Newest entrant is Proxion, which announced in March 2009 the
interest to enter the markets in 2011 (Helsingin Sanomat, 2009). However, the situation
3
The world’s longest railway, 9 298 km.; from Moscow to Vladivostok
15
might change dramatically once the Russian border is deregulated. At the moment the
eastern border is sheltered from competition, signifying only VR Cargo and the Russian
Railways (Российские железные дороги, RZD) can practice the transit traffic. The
locomotives are changed at the border, therefore VR is the only railway undertaking
which can actually operate railway freight traffic in Finland. Additionally, not all
Russian wagons receive the permission to enter the Finnish rail network. The agreement
is to be reformed in the next few years. (Iikkanen, 2007) If the transit traffic is
deregulated, Finnish market might face a situation several Russian railway undertakings
enter the market. The situation is interesting for the Finnish Rail Administration: in
order to be ready for future challenges, it is vital to understand how the other markets
encountered the situation after the liberalization.
Railway freight markets’ deregulation has been studied in numerous studies (see for
example Brewer, 1996; De Jorge & Suarez 2003; Hilmola et al., 2007; Jensen &
Stelling, 2007; Ludvigsen & Osland, 2009; Mäkitalo, 2007; Profillidis, 2004). Several
studies have scrutinized the railway freight liberalization pioneers, for example UK (see
for example Brewer, 1996; Woodburn, 2003; Woodburn, 2007) and US (Boyer, 1987;
Jahanshahi, 1998; OECD, 1997). Numerous studies have concentrated on comparing
western countries, like UK, Sweden, Germany and US (see e.g. Hilmola et al., 2007;
Ludvigsen & Osland, 2009; Profillidis, 2004) or eastern countries (Szekely, 2009).
However, a clear gap exists in comparing western and eastern countries. Some studies
have opened the path; Szekely & Hilmola (2007) analyzed Swiss, Japanese, Polish and
Hungarian railways. Existing literature mainly builds on second-hand statistics and
literature analyses, concentrated on researching the influences on the country level.
Therefore, there is a lack of studies done by gathering first-hand data via interviewing
experts, who have experienced the deregulation and have entered the railway freight
market after liberalization.
1.2
Objectives of the research and research problem
The objective of the study is to examine the special characteristics of entering the
markets after the deregulation. This study familiarizes with the theoretical knowledge of
the main market entry strategies and market entry barriers and brings it to the empirical
level by investigating the expert’s opinions operating in the deregulated markets. The
purpose is to find out how railway undertakings determine to enter the markets and
clarify the used strategies. The intention is also to define the main barriers to entry,
difficulties and black spots confronted by the railway undertakings. Railway freight
transport was deregulated recently in Finland, opening up a current topic for research.
Through the gathered information, research attempts to deliver piece of advice how the
Infrastructure Managers could improve their services towards potential new entrants.
The aim is to gather genuine information how the railway liberalization affected on the
markets at actor level by interviewing railway undertakings who tapped the situation.
There is a research gap in the literature of combining Swedish and Polish markets.
Secondly, earlier studies have gathered the information by questionnaires in narrow
form. This study will try to tackle some of that gap. Additionally, this research is among
the first ones which interviews the experts who have experienced the process.
16
By developing the research’s main objective, research questions are developed. Five
sub-questions follow the main research questions, with an objective to support the
research purposes.
The main research questions of the study are:
Do market entry barriers exist in railway freight market? What are the main barriers
confronted by the railway undertakings?
The sub-questions are:
1. Which entry strategies are mainly used by the new railway undertakings?
2. How the Infrastructure Manager could enhance its service towards new entrants of
railway freight market?
3. What were the main effects created by the liberalization at actor level?
4. Does the infrastructure’s condition boost competition?
5. Does intramodal and intermodal competition prevent new railway undertakings to
enter the markets?
1.3
Literature review
The history of modern economics leads back to 1700s, when Adam Smith published the
Wealth of Nations, which is often regarded as basis for classical political economics
(Bowles & Gintis, 1993; Mäkitalo, 2007). One of the most recognized thoughts were
“the invisible hand”, which according to Smith & McCulloch (1863) guides the
economy and improves the welfare. Today neoclassical economics recognizes several
market structures, perfect competition and monopoly presenting the extreme ends. In
between lies several market forms, free competition having a major role. (Baye, 2005;
Begg et al., 1994) In 1970s, when nations noted public sector was too involved in
economics due to nationalization, countries’ started deregulation process. First market
to be deregulated was US airlines in 1978; railway followed in 1980. (Begg et al., 1994;
Jahanshahi, 1998; OECD, 1997) Same trend extended to Europe few years later, when
several European countries, including UK, Germany and Sweden, decided to deregulate
the railway freight market (Alexandersson & Hulten, 2005; Jahanshahi, 1998).
Railway freight markets’ deregulation has been a hot topic during the last decades.
Several studies (see for example Brewer, 1996; De Jorge & Suarez 2003; Hilmola et al.,
2007; Jensen & Stelling, 2007; Ludvigsen & Osland, 2009; Mäkitalo, 2007; Profillidis,
2004) are conducted, concentrating on either to expound on the development,
comparing progress in countries or evaluate the future prospects. Understandably, the
main emphasis has been on liberalization pioneers, who deregulated the markets already
decades ago (see for example Boyer, 1987; Brewer, 1996; Jahanshahi, 1998; Woodburn,
2003; Woodburn, 2007). However, the European Union noticed in 1990s in order to
guarantee the free movement of goods, it should extend the mindset to transport
activities. Directive 91/440, White paper published in 1992 and White Paper in 1996
guaranteed the process was progressing. As an outcome, European Parliament wrapped
up a decision in 2004 to deregulate the European Union railway freight market latest on
1st January 2007. (European Union, 2009; the White Paper, 1992; the White Paper,
17
1996) Recently, researchers have focused on studying countries which deregulated the
railway freight market in the last stage (see for example Hilmola & Szekely, 2007;
Ludvigsen & Osland, 2009; Profillidis, 2004; Szekely, 2009).
Markets face various barriers to entry, varying depending on the market’s structure,
industry and amount of players. Therefore, it is essential to understand the market entry
barriers, which may complicate the entry process. The subject’s theoretical dissection
started in 1950s, when Bain published “Barriers to New Competition”, which is seen as
a pioneer piece of the theory (Baron, 1973; McAfee et al., 2004; Pehrsson, 2009;
Schmalensee, 1981). Since several authors have contributed to barriers to entry theory.
Among the latest studies are McAfee et al. (2004), whom conceived the division
between economic and antitrust barriers. Even more recent study was conducted by
Pehrsson (2009), who building on insights of Hambrick (1983) and Peteraf & Reed
(2007) presented a model combining the barriers to entry and new entrants’ market
entry strategies. According to his study (Pehrsson, 2009), a new entrant faces extensive
exogenous and endogenous barriers and therefore chooses a broader market scope than
an earlier entrant. Pehrsson (2009) also notes incumbent strategy affects on market entry
barriers, and therefore impedes the market entry of potential newcomers.
Market entry process consists of several steps. Before actually entering the market,
Koch (2001) suggested newcomers should become acquainted with internal and external
factors affecting on the entry mode’s selection, subjects such as environment’s
characteristics, competencies, capabilities and skills required / available and own
experiences. According to various studies (Macht & Robinson, 2009; Robertson et al.,
2003; Sørheim, 2005), the main problems start-ups face when entering the markets are
of financial nature. In addition to financing by banks, start-ups can pursue help from
venture capitalists or business angels (Deakins, 1996; Wiltbank, 2005). In the case of
mature firms, vertical integration, strategic alliances and subsidiaries are the mostly
used forms (Blomstermo et al., 2006; Kotler, 1988; Kotler, 2000; Lee et al., 2000).
Several methods can be utilized when analyzing industry’s competitiveness. Porter
(1980) introduced five forces model, which is since employed by several researchers
(see e.g. Casaca & Marlow, 2007; Keegan, 1984; Kotler & Scheff, 1997; Mäkitalo,
2007). In compliance with Porter (1980), the collective strength of five forces
determines the primary profit potential in the industry. Alternative way of measuring the
industry is to utilize the strategic grouping, which was created by Hunt in 1972 but
popularized by Porter in 1980 (Feka et al., 1997; Hatten & Hatten, 1987). By grouping
companies into strategic groups their structure can be examined and analyzed and the
attractiveness can be checked (Feka et al., 1997; Porter, 1980, 129 – 130). In addition,
Porter (1980) divided firms into two categories, industry leaders and followers,
depending on their status at the market. This naturally distinguishes strategic groups
(McGee & Thomas, 1986; Porter, 1979, 220 – 221). Besides, mobility barriers, group
specific entry barriers, provide advantages to different groups (Caves & Porter, 1977).
Worth mentioning is a study conducted by Smith & Grimm (1987), which studied and
grouped the US railway market in 1984. Researchers classified the answers into five
strategies, and in addition to focused or unfocused types. Smith’s and Grimm’s (1987)
result was surprising: 57 per cent of studied companies (15 firms out of 27) changed
their strategies. In further studies few years later, Smith and Grimm (1991) revealed that
18
managers’ age and years of industry service had a straight correlation with strategic
change.
1.4
Theoretical framework
This research combines various areas of business. The main basis is built on economics: work
originates from classical political economics and Adam Smith, continues to theory of
competition in the form of barriers to entry and moves on to market entry strategies. However,
due to the nature of the thesis, transportation theory’s share cannot be ignored. Theoretical
framework is illustrated in figure 1.
Railway operation environment
INDUSTRY
COMPETITION
Railway
undertaking
Railway
undertaking
MONOPOLISTIC
MARKET
DEREGULATED
MARKET
STRATEGIC
GROUPS
?
Railway
undertaking
MARKET
LIBERALIZATION
Market entry and barriers to entry
Time T
Figure 1
Time T+1
Time T + 2
Theoretical framework
Figure 1 describes the theoretical framework in two ways: it presents the market entry
process in chronological order, starting from monopolistic market situation. When
markets are deregulated, new undertakings can enter the liberalized markets. This has
happened in several countries, including Poland and Sweden, research’s case countries.
Although the Finnish railway freight market was deregulated in 2007, new entrants have
not entered the markets. The question mark in Figure 1 presents the prevailing situation
in Finland. The main question behind it is “how new entrants’ could be persuaded to
enter the Finnish markets?” Railway operation environment stands for transportation
theory; market entry and barriers to entry enlarge on the theory of competition. Strategic
groups and industry competition presents the types to analyze the market. Time frame in
the bottom explicates the change occurred.
19
Dependent factor
Controlled factor
• Access to network
Independent factor
Number of railway undertakings
• Barriers to entry
• Market entry strategies
• Number of existing railway
undertakings
• Infrastructure Manager’s tasks
Figure 2
Independent, dependent and controlled factors
Research dependent, independent and controlled factors are presented in figure 2. As
figure illustrates, this research’s dependent factor, the observed variable is number of
railway undertakings. As stated in one of the sub-research question, Infrastructure
Manager wants to know how it could create preconditions that would enable to increase
the number of railway undertakings in the Finnish markets. Therefore, Infrastructure
Manager’s tasks are one of the independent factors, among barriers to entry, market
entry strategies and number of existing operators. Controlled factor, the factors which
are kept constant is for example access to network.
1.5
Delimitations
Although railway market deregulation is rather young concept, it has been a theme of
numerous research works. Research is limited to focus only on railway freight market,
passenger market is excluded from this study. Although, study concentrates only on two
countries, in order to clarify the concept of railway deregulation, British and American
railway freight markets are discussed briefly. Due to amplitude of possible literature and
theories, only the main constructs are included. Therefore, some interesting theories,
including moral ethics from philosophy and cultural theory are excluded.
Regarding time, this study’s empirical part was limited into two countries, Sweden and
Poland. There are several reasons why exactly these countries were chosen. First,
Swedish market structure is rather similar to Finland, excluding iron ore transports in
Northern Sweden. Poland was seen as an interesting option due to its activity level: a lot
has happened since railway market was liberalized, for example railway undertakings
have acquired smaller actors. Secondly, Liberalization Index, which presents the
relative market opening in EU countries including Norway and Switzerland, concluded
Sweden belongs to “advanced” and Poland to “on-schedule” groups. Research attempts
to understand if there is something else involved than the fact Sweden was among the
first countries in Europe to deregulate the railway freight market. Thirdly, Sweden is
counted in Western European countries, whereas Poland belongs to Eastern European
countries. Research attempts to compare the results and understand if differences exist.
Inside Polish or Swedish market geographical location was not seen as a limitation,
which enriches the empirical findings. All Swedish railway undertakings were
contacted, excluding one small-sized railway undertaking. Because Polish market has
over 90 railway undertakings that have a license to practise railway freight transport, an
extensive sample was chosen. However, the railway undertakings who agreed to
20
participate might have different opinion than the excluded ones. Only one person was
interviewed per railway undertaking, which can be seen as delimitation. Additionally,
all interviewees were in managerial position and males, which can be regarded as
delimitation.
Language barrier created delimitations in Poland. Although interpreter was present and
all information was translated, due to technicalities some matters might have been
misunderstood.
Lastly, this research concentrates on industry perspective; therefore companies’ internal
knowledge is not sifted. Additionally, resource based view (RBV) is not utilized.
Research’s main intention is to study the railway freight market as an entity, whereas
resource-based view tackles the company’s key resources. Therefore resource-based
view does not examine the correct factors.
1.6
Definitions of the key concepts
Barriers to entry
According to Porter (1980), market entry barriers are obstacles preventing new entrants
from entering markets. In railway freight transport it means the problems and
challenges, which prevent new railway undertakings of entering the market. Market
barriers can be for example governmental (laws) or money and product / service based
(capital requirements, product / service differentiation).
Market deregulation
Market deregulation refers in this research to opening the market for competition,
decontrol the monopoly. This enables new railway undertakings to enter the markets.
This research concentrates on Polish and Swedish markets. Synonyms for the market
deregulation include opening up the market, market liberalization and opening the rail
network.
Market entry
Market entry refers to processes and operations a new entrant must fulfil before it can
initiate railway transport (Mäkitalo 2007). Process consists of various steps, including
becoming acquainted with entry modes, deciding the entry strategy and familiarizing
with market entry barriers.
Railway freight transport
Railway freight transport signifies transporting goods on tracks. Rail transport can be
divided into two sub-groups, freight and passenger transports. The other railway traffic
alternatives, tramway and metro, are designed for passenger transportation. This study
concentrates only on freight transport.
21
Railway undertaking
Railway undertaking refers to a private-owned company who possess rolling stock and
practice railway transport as its main business.
1.7
Research methodology
Hirsjärvi et al. (2004) state qualitative research’s main intention is to understand the
research subject. The main difference between qualitative and quantitative research
methods is their nature: qualitative concentrates on words whereas quantitative research
main focus is on numerical data (Eisenhardt, 1989). The methods can be utilized also in
surprising connections: Sutton & Callahan (1987) relied solely on qualitative data while
studying bankruptcy in Silicon Valley, and Eisenhardt & Bourgeois (1988) gathered
quantitative data from earlier studies, which were qualitative by nature. Yin (1981)
theorized although case study is often integrated with qualitative research, as well it can
involve only quantitative data, or both. Additionally, case study approach can be
utilized in surprising connections. Lukka & Kasanen (1995) noted case study
methodology has been increasingly used in management accounting studies. Although,
interviews can disclose both qualitative and quantitative data (Eisenhardt, 1989), this
research is qualitative by nature. Häkkinen & Hilmola (2005) stated case study research
has become a widely used research strategy in logistics. They concluded logistics case
studies mainly concentrate on descriptive research objectives (Häkkinen & Hilmola,
2005). Because this study is logistical by nature and it attempts to give proposals for
improvement as well as to describe the current situation, research is mainly descriptive
analytical but it embodies also normative methods (Routio, 2007).
Kathleen M. Eisenhardt (1989) argues case study method is especially feasible when
studying new topic areas. In addition, because case study approach does not rely only on
previous literature or prior empirical evidence, theory building from case study research
is especially appropriate (Eisenhardt, 1989). This explains why case study method was
chosen as a research method in this particular research. Due to lack of earlier first-hand
empirical data, by interviewing experts from several railway undertakings author was
able to gather genuine information at actor level. In compliance with Eisenhardt (1989),
close interaction with the topic produces theory which closely reflects reality. Although,
case study is often imagined to concentrate on only one case company, according to
Eisenhardt (1989) this approach might create problems; amount between four and ten
cases usually works well. If sampling has less than four cases, it is difficult to generate a
theory and empirical working knowledge is likely to be unconvincing. However, with
more than ten cases, the amount and complexity of data might be hard to handle.
(Eisenhardt, 1989) This study consists of 16 cases, including two Infrastructure
Managers and one terminal operator which did not belong to research’s main target
group. Therefore, the actual case amount is 13. Because the quantity of data is
extensive, this research needs to pay special attention on delimitation. However, when
contemplating the gathered data on country basis, the amount of cases is numbered
down to six (Sweden) and seven (Poland). As mentioned earlier, these figures reckon
among the adequate number stated by Eisenhardt (1989).
22
Häkkinen & Hilmola (2005), building insights of Vafidis (2002), stated commonly is
assumed case studies use an inductive approach. Brown & Eisenhardt (1997) and
Hilmola (2003) ratified the contention and noted inductive approach is used more
frequently in case studies. In deductive approach research work starts from current
theory to data; logical thinking is used as generic tool in the creation process of a proper
construction (Hilmola, 2003). Inductive approach is mainly used to generate new
findings for current theories; however, researchers often cannot state which approach
they are using (Brown & Eisenhardt, 1997; Hilmola, 2003). According to Hilmola
(2003), generally case study researches are not purely inductive or deductive by nature.
This research uses inductive approach: research’s intention is to generate new findings
and confirm the existing ones.
1.8
Structure of the research
In chapter 1 was reviewed the topic of the study. It gave a glance to the background,
stated the objectives and presented a literature review. Additionally first chapter defined
the key concepts and illustrated the delimitations and research methodology. The
research questions were introduced; ensuing chapter examines the outcomes for the
research questions. In chapter 2 literature review concerning railway freight market was
introduced. The chapter approached the European Union legislation and clarified the
contents of directives and White Papers. The second chapter also demonstrated the
deregulation process in Sweden, Poland and Finland.
In Chapter 3 was concentrated on competition theory: barriers to entry and market entry
strategies. It described the results of earlier studies and replenished the outcome with
Porter’s five forces and illustrated the concept of strategic groups. Following chapter 4
presented the concept of transport infrastructure and introduced the main modes of
transport. It described the modal split of freight transport and briefly introduced the
situation in case countries.
In chapter 5 was reviewed the research environment. Approach for research was
explicated, followed by exposition of a theme interview. Chapter concluded by
presenting the data collection methods. Empirical data was examined in chapter 6. Case
countries Sweden and Poland were studied separately, assembling the main data. The
market entry strategies utilized were described and barriers to entry were untangled.
Additionally, collaboration level with the local Infrastructure Manager was studied. In
chapter 7 was reviewed the comparison between Polish and Swedish results. The main
outcomes were discussed and major discrepancies explained. Chapter 8 was engrossed
in outcomes and main results. Theory and empirical data were concluded and discussed.
Ultimate chapter finalized the empirical outcomes and theory, and proposed suggestions
for further research.
Figure 3 illustrates the structure of the thesis, describes why matters are interfaced to the
research and states the goals. In addition, the figure is split into three subgroups,
literature study, empirical research and summary. This intention is to clarify where
information stands.
23
Literature study
2. Railway freight
market
and market description
3. Market entry and
barriers to entry
WHY
To understand the
history and market
structure. To describe
EU legislation and why
this situation occurred.
To describe basics of
market entry process
and the entry barriers
by using several
methods. To present
tools to analyze the
industry.
To illustrate the main
transportation modes
and transport
infrastructure in
countries concerned.
GOAL
Basic understanding
about deregulation
process and
differences between
countries concerned.
To understand market
forces, barriers to
entry and entry
strategies. To know
how to measure them.
Be familiar with
transportation modes
and the national
peculiarities; to
understand the
differences between
countries
WHAT
I
N
T
R
O
D
U
C
T
I
O
N
Empirical research
5. Research
environment
Short description
about market
peculiarities
To introduce the
Polish and Swedish
railway
transportation
markets
Figure 3
4. Transport
infrastructure
Summary
6. Empirical part
7. Research results
8. Conclusion
To gather the collected
data and present the
data and outcomes
To gather the research
results and present it
in an explicit way
To conclude the
research, combine the
results and the theory
for the last time. Give
suggestions for further
researches.
To give an extensive
outlook concerning the
Swedish and Polish
operators opinions. To
describe the market
situation in the
countries concerned.
To understand the
Polish and Swedish
railway freight market,
its operators, market
barriers etc. To
describe the results.
Structure of the thesis
To conclude the
research and give a
extensive and explicit
ending for the
master’s thesis
24
2
RAILWAY FREIGHT MARKET AND MARKET DESCRIPTION
Globalization has had a considerable impact on the traditional transport structure.
Countries’ equity ratio cannot guarantee all products needed; locations of raw materials
and consumables are not identical, which produces need for transportation. Whilst
transport volumes increase, ecological values’ importance has increased: carbon
footprint has become a consequential measure known world widely. Additionally more
attention needs to be focused on choosing the most cost-effective and customer-oriented
mode of transport. Many researchers have noted transport market liberalization
improves these factors (see Hilmola et al., 2007; Mäkitalo, 2007; European Union
2009). Transport market liberalization, including road and railway transport, has been
considered as a measure to increase efficiency (Profillidis 2004).
Railway market liberalization has been a hot topic for decades. After World War II the
railway transport share decreased worldwide, incurring bankruptcies. For example, in
United States ten major railroad bankruptcies happened in 1970s (Jahanshahi, 1998).
Same trend was seen worldwide, when other transport modes displaced railway
transports. Nations realized something had to be done; railway deregulation was noticed
as a solution. Railway freight liberalization was identified as a tool to promote
competition not only among the industry, but also among different transport modes.
(Profillidis, 2004) Liberalization meant the freedom to define freight rates and
possibility to organize production and costs in line with market conditions (Bereskin,
1996).
2.1
History
Railways have been the first regulated markets in many countries. United States (US)
was among the first ones by regulating the railways in 1887 with the Interstate
Commerce Act. Same trend continued and US was the first country to deregulate the
railway market in 1980. The Staggers Rail Act opened the markets and introduced the
possibility for railway undertakings to negotiate the railway contracts without
interference. (Jahanshahi, 1998) OECD’s research report (1997) stated railway
deregulation’s major benefit was the improved service level, providing more reliable
and rapid services. The benefits were estimated to be worth of 5 million US dollars in
1990. At the same time employee productivity doubled during 1983 and 1992, enabling
railway transport to compete against other modes of transport, namely road, sea and air.
(OECD, 1997)
Market liberalization was successful in North America because the transportation
market was more competitive than traditionally was believed. The main commodities
transported included bulk products and containers moving over long distances. Railway
offered cost-effective way of transportation also for heavy industries like mines,
electricity generating stations, refineries and manufacturing plants, which were not
located by the waterway and therefore were not able to be served via sea transport.
(Gomez-Ibanez, 2004)
25
The first European countries to deregulate the railway markets were United Kingdom
(UK), Germany and Sweden (Jahanshahi, 1998). In compliance with Alexandersson and
Hulten (2005), the liberalization process in the European Union nations have been
driven by various types of economic, institutional and legal concerns. Alexandersson
and Hulten (2005; 2008) conclude in UK strive was towards market liberal agenda,
whereas in Sweden the main force was to find new possibilities to finance railway
investments. European member states utilized four broad types of deregulation. The
United Kingdom utilized rationalist approach, while Sweden relied on incremental way.
Alexandersson and Hulten (2005) describe the German and Dutch approach as “wait
and see” and French as a reluctant applying approach. (Alexandersson & Hulten, 2005;
Alexandersson & Hulten, 2008)
In UK the privatization process started in early 1980s. In the freight railway sector a
partial deregulation was introduced in 1989 by numerous privately owned terminals,
wagons and locomotives. The final stage was enabled in 1992 when the British
Government published a White Paper called “New Opportunities for the Railways: The
Privatisation of the British Rail”. The markets were opened for free competition in
1994. (Gibb et al., 1996) Entire deregulation process was carried out during 1994–1997,
whereby the former integrated monopoly market was separated into total privatization.
The process divided market into two: Railtrack became responsible for the
infrastructure and railway undertakings got the responsibility of the railway services.
(Alexandersson & Hulten, 2005) However, UK liberalization process is said to be a
failure. The railway infrastructure company Railtrack failed to operate the market
efficiently. Because of lack of investments rail network was not in decent condition,
passenger trains accuracy decreased significantly from 90 per cent down to 60 per cent
and train accidents increased. After five years it was badly in debt and finally
bankrupted in 2001. (Hilmola et al., 2007; Szekely, 2009) In 2002 UK accepted
investment plans worth of £ 34 billion to increase the safety level and reorganize the
infrastructure. Today the rail network is in better condition than ever. (Hilmola et al.,
2007)
Germany started the liberalization process in 1993 with the Railway Restructuring Act
(Profillidis, 2004). Sweden’s process started in 1988 when Transportation Policy Act
was introduced. The first new entrant started regional traffic in 1990 and first
entrepreneurial feeder lines, so called short lines were established in 1991 (Jensen &
Stelling, 2007).
Profillidis (2004) studied railway freight market’s liberalization in Germany, UK, US
and the expected impact within European Union. The main finding was that in two
countries out of three, the railway transport efficiency increased significantly when
markets were liberalized. Table 1 presents the findings.
26
Table 1
Impact of liberalization of railway freight market in Germany, UK, US
and expected impact within EU (Profillidis, 2004, p. 272)
Parameter
Improvement of railway transport efficiency
An increase of railway transport market share
Tendency towards oligopolistic situations
A decrease of services in rural areas
Adverse impact on railway transport safety
Germany
x
x
-
UK
?
x
-
US
x
x
-
EU
x
x
x
?
-
Profillidis (2004) introduces five items: improvement of railway transport efficiency, an
increase of railway transport market share, tendency towards oligopolistic situations, a
decrease of services in rural areas and adverse impact on railway transport safety. The
research revealed the significant differences between countries. The only parameter,
which was seen in two countries, was improvement of railway transport efficiency:
Germany among US noticed increase in this sector. According to Profillidis (2004), in
Germany the liberalization led to increase in investments, which contributed to 94 per
cent increase in productivity from 1993 to 1998. The other parameters where found only
from one country. Germany was the only country where market liberalization decreased
the services in rural areas, while US was the only nation where tendency towards
oligopolistic situations were noticed. UK noticed an increase of railway transports’
market share. Profillidis (2004) states between 1995/1996 and 1997/1998, carried tonnekilometres increased 27 per cent, from 13.3 to 16.9 billion. According to Profillidis
(2004) and Boyer (1987), in US the railway transport market share dropped. Boyer
(1987) estimated the reason was increased railway rate level.
In compliance with Profillidis (2004), railway market liberalization has a positive
impact in European Union. According to his research the market efficiency, the railway
transport market share and tendency towards oligopolistic situations would increase.
Decrease in services in rural areas is the only vague parameter. However, he professed it
is extremely hard to predict due to countries discrepancy. He also noted the technical
problems are one major complication. (Profillidis 2004)
2.2
European Union
The history behind European Union leads back to year 1949, when few West European
nations created the council of Europe. The European Economic Community (EEC) or
“common market”, which enabled goods, people and services to move freely among
member states, was introduced in 1957. The final reinforcement happened in 1993,
when the Single Market was completed with so called “four freedoms” (History of EU,
2008): movement of goods, services, people and money. (European Union, 2009;
History of EU, 2008)
Free movement of goods increased the need of transportation in European Union. The
Commission perceived some actions were needed. One of the earliest initiatives was the
European Directive 91/440, which stated railway infrastructure and operations need to
be separated. This directive has commonly functioned as the first step towards reformed
27
railway market in the European Union. (Alexandersson & Hulten, 2005; European
Union, 2009)
The second step towards integrated transport market was the White Paper4 published in
1992. The Paper dealt mostly about opening up the transport markets. Same message
was seen in the second White Paper called “A Strategy for Revitalising the
Community’s Railways”, which was published in 1996. This paper stated in the section
I “A New Kind of Railway is Needed” (the White Paper, 1996). In addition to opening
up the transport markets, Paper stated the European Union believes railway transport
should play a bigger role in the future. According to the White Paper, a social impact of
transport can be reduced, if great amount of traffic is transferred from road to rail.
Already in 1996 was clear that the increase in using the railway would solve many
problems (for example pollution and congestions). The White Paper states (1996) “It is
paradoxical that, when many of the problems that rail could help to solve are
increasing, its share of transport markets continues to decline”. The paper introduced
the term “Rail Freight Freeway”, which states the existence of national railway
undertakings is hampering the railway’s development. Therefore, this paper can be seen
as the first stride against the railway market deregulation. (The White Paper, 1996;
Mäkitalo, 2007)
Commission submitted the White Paper called “European Transport Policy for 2010:
Time to Decide” in 2001. It continued the idea of developing a transport system capable
of changing the balance between modes of transport. The intention was to revitalize the
railways, promote sea and inland waterway transportations and control the growth of air
transport. One of the White Paper’s cornerstones was the completion of an integrated
transport market for railway freight transportation. In addition, Commission proposed
60 or so measures to develop these areas. The White Paper also declaimed the EU must
develop socially, economically and environmentally sustainable transport system.
(European Union, 2009; the Summary of White Paper, 2001; Mäkitalo, 2007)
The White Paper (2001) stated during the last decades the “stock economy” has moved
to a “flow economy”. This means various industries trying to reduce production costs
are relocating the factories, although the distance between the production place and the
end-consumer might be thousands of miles. Free movement of goods enables to confirm
“just-in-time” and “revolving stock” production system. European Union member states
fear unless new measures are taken by 2010, heavy goods’ road transport will increase
by nearly 50 per cent from the 1990s level. The White Paper exposed The
Commission’s concern towards increasing traffic in European Union: in 2000 railway
transports’ market share was 8 per cent, while same figure in US was 40 per cent.
(Vassallo & Fagan, 2005; the Summary of White Paper, 2001)
The Second Railway Package was introduced in 2003. 23rd October 2003, Members of
European Parliament (MEPs) voted to open up the European railway traffic system. The
intention was to grant a free access to rail networks in all EU countries by 1 January
2006. (Euractiv, 2008) The Package was approved by the European Parliament and
4
The White Paper is a report or guide which addresses problems and ways to solve them
28
Council in April 2004. The Council and the Parliament agreed the national railway
freight transport will be deregulated 1st January 2007. (Mäkitalo, 2007)
Today the European Union railway policy has five objectives (Alexandersson & Hulten,
2005): 1) create a common railway transport market, 2) achieve uniform technical and
operational standards in all member states, 3) establish a common market for rolling
stock and railway material, 4) provide equal conditions for competition between
different transportation modes, and 5) support a continuous development towards the
transport modes that are more environmentally friendly, namely railway and sea.
(Alexandersson & Hulten, 2005; European Union, 2009)
European Union has introduced numerous actions in order to decentralize the transport
customs. Marco Polo is a funding program which intention is to shift the transport from
road to sea, air, inland waterways and railways. Marco Polo’s byword well defines the
purpose (Marco Polo, 2009), “Free Roads – Clean Air: it is estimated that every Euro
of Marco Polo funding generates social and environmental benefits worth six Euros or
more.” The current, second Marco Polo program (2007–2013) aims to deduct road
transport by programs “motorways of the seas” and “traffic avoidance”. (Marco Polo,
2009)
The Rail Liberalization Index (LIB Index) is a tool, which presents the relative market
opening in EU countries including Norway and Switzerland. According to LIB Index,
all countries have continued to liberalize the railway market. However, the report
observes the high entry barriers in few countries prevent having uniform access
conditions. It is also noted that some countries are obeying the EU directives only on
paper and grant feasibility to enter the networks only with restrictions. According to
countries’ performance, they are divided into three subgroups: advanced, on schedule
and delayed. Figure 4 illustrates the situation in the European countries. (The Rail
Liberalization Index, 2007)
29
GB Great Britain
827
DE Germany
826
SE Sweden
825
NL Netherlands
809
DK Denmark
788
AT Austria
788
CH Switzerland
757
PL Poland
739
CZ Czech Republic
738
RO Romania
722
PT Portugal
707
SK Slovakia
700
NO Norway
698
EE Estonia
691
LT Lithuania
684
IT Italy
676
SL Slovenia
665
BG Bulgary
652
LV Latvia
650
BE Belgium
649
HU Hungary
637
FI Finland
636
ES Spain
630
LU Luxembourg
581
FR France
574
GR Greece
559
IE Ireland
0
333
100
Figure 4
200
300
400
500
600
700
800
900
LIB Index 2007, country division (Adapted from the Rail Liberalization
Index, 2007)
Figure 4 presents the status of countries’ liberalization process. The four first countries,
Great Britain, Germany, Sweden and Netherlands belong to “advanced”: all these
countries have made remarkable progress in the field of market opening. In the second
and at the same time the biggest group, “on schedule” includes 18 European countries,
including Finland and Poland. The third group, “delayed”, consists of four nations:
Ireland, France, Greece and Luxembourg. These countries have the highest entry
barriers.
Research’s empirical part concentrates on two countries: Sweden and Poland. Sweden is
among the “advanced” countries while Poland is on the fourth place in the ”on
schedule” group. Finland is in the same category in 18th place. The great differences can
be partly explained by the time of liberalization: Sweden opened the markets already in
1990s and Poland followed in 2000 (Hilmola et al., 2007; Taylor & Ciechanski, 2006).
2.3
Sweden
The Transport Policy Act published in 1988 functioned as the first initiative of Swedish
railway freight market liberalization. The regulation was prescribed in Council’s
Directive 91/440/EEC, which intention was to develop the Community’s common
railway structure. Liberalization changed the vertically and horizontally integrated
monopoly into a market characterised by decentralisation and intra-modal competition.
30
(Alexandersson & Hulten, 2005; EU Directive, 1992) The privatization in Sweden was
“a slow moving and incremental process” (Hilmola et al., 2007).
Formerly the reform Swedish railway freight sector was monopolized by the Swedish
State Railways (Statens Järnvägar, SJ). SJ was not only controlling and responsible for
all railway related services, but also involved in ferry traffic, long-distance bus services
and forwarding agents. Since the liberalization the Swedish government took a full
responsibility for railway infrastructure by establishing the Swedish Rail
Administration, Banverket. Banverket is an authority that is responsible for the rail
network in Sweden, including monitoring and developing the rail network, operating
and administrating the track system, co-ordinating all railway transport and providing
support for research and development on matters related to railways. Banverket also
assists the Parliament and the Government on railway issues. After Banverket’s
establishment, SJ concentrated on the freight operating services. (Alexandersson &
Hulten, 2005; Banverket, 2009)
The Act extended the responsibility of the County Public Transport Authorities5
(CPTAs) into railway services. However, it was not mentioned in the Act to liberalize
the railways in terms of increased intra-modal competition. The vertical separation of
infrastructure from operations made public acquisition by competitive bidding possible.
CPTAs had tried bidding for the bus services earlier; therefore it was natural to use
competitive bidding also in railway. The outcome was establishment of BK Tåg in
1990, the first new entrant for more than 40 years. (Alexandersson & Hulten, 2005)
The Swedish Ministry of Transport expressed in 1991 the resources could be used more
efficiently if more railway undertakings would enter the railway market. SJ still had a
strong power and many politicians were afraid it might become too strong. The
Parliament declared in September 1991 that its objective is to liberalize the railways in
order to increase the competition among the market. The first initiative was to subject
railway market to bidding. During 1993–1994 the feasibility of liberalizing the whole
rail network was discussed in various reports. In May 1994 the liberalization was passed
to Parliament, despite opposition from the railway unions, the Social Democrats and the
left-wing party. In September the same year, Social Democrats regained power in
Parliament and postponed the deregulation. A less radical reform was suggested, taking
the effect in July 1996. Open access to whole network was introduced for freight
operations, based upon a belief that railway transport would increase the market share if
it is forced to adapt to what to market wanted. Actual access to capacity was organized
through a “Grandfather’s right” clause6, although this rule was enforced infrequently.
The “Grandfather’s right” was eventually rejected in 2004. (Alexandersson & Hulten,
2005; Alexandersson & Hulten, 2008)
Reforms continued in 1998 when a new Transport Policy Bill was accepted. The main
concentration was to achieve more equal terms between different transport modes;
railway market was supported by lowering the track infrastructure charges. While
agreeing on a new transport policy, a new agency was established. The National Public
5
6
CPTA was established in 1979 to coordinate regional public bus services
Grandfather’s right clause = operator has a right of precedence to a timetable position it had used before
31
Transport Agency (Rikstrafiken) started to operate 1 July 1999. Authority’s main
responsibilities included competitive bidding of unprofitable inter-regional services (all
modes of transport), aiming at better cooperation with CPTA-bided services. Following
the market entry of new operators in 2000, a new Bill’s objective was to ensure equal
access to functions and services for all operators. In 2001 SJ’s organizational structure
was divided into several state-owned companies concentrating on specified business
areas. The freight division formed one company, called Green Cargo. (Alexandersson &
Hulten, 2005; Alexandersson & Hulten, 2008; Green Cargo, 2009; Rikstrafiken, 2009)
Various authorities have been responsible for safety matters. The Swedish Railway
Inspectorate, Järnvägsinspektionen, was established in 1988 and its main responsibility
was to supervise and safety and investigate the possible accidents. The Inspectorate was
part of Banverket till 2004, when the Swedish Rail Agency, Järnvägsstyrelsen, was
established. Responsibilities were sifted to the new company. The last change occurred
in 2009, when the Swedish Transport Agency, Transportstyrelsen, was formed. In
addition to railway, agency is responsible for all other transport modes. (Banverket,
Sector Report 2009; Holmgren, 2005; Transportstyrelsen, 2009)
Government
Ministry of Enterprise,
Energy and
Communications
Other government
authority
National Public Transport
Agency (Rikstrafiken)
Swedish Transport Agency
(Transportstyrelsen)
Regulatory
body
Infrastructure
Manager
Banverket
Other Infrastructure
Managers
Capacity
allocation
Banverket
Other Infrastructure
Managers
Incumbent
Green Cargo
New Entrants
16 railway undertakings
Railway
undertakings
Figure 5
Key stakeholders in the Swedish railway industry (Wolf, H & Stenbacka,
H 2009, pers. comm., 8 May)
Figure 5 presents the current key stakeholders in the Swedish railway industry. The
Ministry of Enterprise, Energy and Communications is the main stakeholder, which
objective is to ensure efficient transport in all parts of the country. The National Public
Transport Agency, Rikstrafiken, has two main tasks: it procures public transport and
develops and coordinates public transport throughout the country. Its main goal is to
create high-quality transport system, safe traffic and ensure good transport environment.
32
Swedish Transport Agency, Transportstyrelsen, was established 1 January 2009. Earlier
the duties were handled by The Swedish Rail Agency, Järnvägsstyrelsen. The Transport
Agency has an overall responsibility for regulations; its railway department formulates
regulations, and examines and grants licences and permits to operate on railway market.
Agency’s objective is to achieve efficient railway market characterized by fair
competition. (Rikstrafiken, 2009; The Ministry of Enterprise, Energy and
Communications, 2009; Transportstyrelsen, 2009)
The three lowest levels present the Infrastructure Managers and railway undertakings.
Banverket is the main Infrastructure Manager owning and maintaining over 9 000 km
network. Regional authorities own few lines, mainly in capital area. In addition, several
fringe lines are owned by municipalities and authorities. Banverket is mainly financed
by national grants, but it also gathers infrastructure charges from railway undertakings.
The Government and Parliament determined Banverket responsible for the development
of the railway sector. This includes railway transportation as well as underground and
tram transportation. (Alexandersson and Hulten, 2005; Banverket, 2009)
Today Swedish railway freight market has 17 railway undertakings; incumbent is Green
Cargo and new railway undertakings include actors like Hector Rail, Tågåkeriet and
Tågfrakt (Wolf, H 2009, pers.comm., 26 March). The full list of railway undertakings is
presented in appendix 6. However, the freight railway market is dominated by Green
Cargo (Järnvägsstyrelsen, 2008). Table 2 presents the main railway undertakings in the
freight market and describes the turnovers during 2005–2007.
33
Table 2
Swedish railway freight railway undertakings’ turnover during 2005–
2007/ thousand SEK (Järnvägsstyrelsen, 2008)
Railway undertaking
Market share
2007
2006
2005
5 294 000
5 204 000
5 260 000
75,5 %
CargoNet AB
525 433
469 657
497 773
7,5 %
Malmtrafik i Kiruna AB
484 548
449 314
462 821
6,9 %
TGOJ Trafik AB
241 699
212 014
189 704
3,4 %
Hector Rail AB
Tågåkeriet i Bergslagen
AB
181 336
131 959
85 749
2,6 %
127 031
109 267
102 320
1,8 %
bankruptcy
74 723
68 297
TX Logistik AB
62 718
57 146
59 547
0,9 %
Bantåg Nordic AB
34 684
9 026
16 160
0,5 %
Tågfrakt AB
13 281
8 530
5 546
0,2 %
Nordic Haulage AB
11 365
5 903
20 719
0,2 %
Midcargo AB
30 324
0,4 %
3 894
0,1 %
Green Cargo AB
Nya Inlandsgods AB
Peterson Rail AB
2007
The significant differences between railway undertakings are described in table 2. Green
Cargo’s dominant position on the market is well on display. Green Cargo’s superiority
compared to other actors is outstanding: turnover is 75 per cent of whole market, while
the next two railway undertakings (CargoNet and Malmtrafik i Kiruna) turnover is
around 7 per cent. Actually, CargoNet AB is a subsidiary of CargoNet AS, which is the
national railway freight undertaking in Norway. Railway undertaking’s ownership is
divided by the Norwegian State Railways (Norges Statsbaner, NSB) 55 per cent and
Green Cargo 45 per cent. (CargoNet, 2009) Rest of the railway undertakings are small
actors with few per cents’ market shares. Worth mentioning is the market’s fluctuation:
although some railway undertakings faced decreases in 2006, all were able to increase
the turnover in 2007.
Internationalization is increasing in railway market. In addition to Sweden, many
railway undertakings have traffic to / from Norway, Denmark and Germany. Mainly the
railway undertakings, which have a subsidiary or strategic alliance with a foreign
company are operating abroad (Green Cargo & Malmtrafik i Kiruna). However, other
railway undertakings, for example Hector Rail and Tågåkeriet, are also operating in the
international markets. (Banverket, 2007; Hector Rail, 2009; Tågåkeriet, 2009)
34
2.4
Poland
The first impulse towards liberalized railway freight market in Poland happened in
1997, when the Railway Transport Law was implemented. It opened the rail network for
domestic and international operators. Although Poland joined the European Union only
in May 2004, government decided to implement the main directives already earlier.
(Poland society, 2009) One of the most important directives in European Union,
Directive 91/440, continued the Polish railway freight market’s deregulation process in
2000, when the Railway Act on restructuring, commercialization and privatization of
PKP was executed. (Steer Davies Gleave Poland, 2003; Wronka, 2007) During the
years 1998 – 2002 Polish government granted 20 concessions for entering the railway
market; however, because of lack of sufficient capital only few railway undertakings
applied the possibility. (Wronka, 2007)
The situation improved significantly, when the new Law on Railway Transport took
effect in March 2003, replacing the older version. The Polish railway industry
transformed to more liberalized direction, which needed changes in industry’s key
stakeholders (see figure 6).
Government
Regulatory
bodies
Ministry of
Infrastructure
Regional
Authorities
Railway Transport
Office (UTK)
Office for Competition
And Consumer
Protection
Infrastructure
Manager
PKP PLK
Capacity allocation
PKP PLK
Railway
undertakings
Figure 6
Incumbent
PKP (Cargo)
New Entrants
49 railway
undertakings
Key stakeholders in the Polish railway industry (Adapted from Steer
Davies Gleave Poland, 2003; Wrobel, J 2009, pers. comm., 21 April)
The Governmental level, Ministry of Infrastructure and regional authorities, are
responsible for railway related matters on the top level. Ministry develops the transport
35
policy and is responsible for issuing licenses to railway undertakings. Additionally, state
provides financial support to the Infrastructure Manager. Regional authorities take care
of intra- and cross-regional railway services. (Steer Davies Gleave Poland, 2003)
Second level, regulatory bodies, includes Office for Railway Transport (Urzad
Transportu Kolejowego, UTK) and Office for Competition and Consumer Protection
(OCCP). UTK operates as the Main Railway Inspectorate, and its main responsibility
concerns the licenses and certificates for new entrants (Art. 43 item 1 of the Act of 28
March 2003 on railway transport – Dziennik Ustaw - Polish Office Journal no. 86 item
789 as amended). UTK’s Chairman is entitled to grant, refuse granting, change or
withdraw the license. Additionally, its responsibility is to minister and concede the
safety certificates (rolling stock as well as railway undertakings). Another regulatory
body, OCCP, enforces the competition in Poland. (Steer Davies Gleave Poland, 2003)
PKP SA is a joint stock company which took over all rights and commitments of the
state-owned firm Polish Railways. The sole shareholder is Ministry of Finance. The
holding company has large number of subsidiaries, including PKP Polskie Linie
Kolewoje s.a (PKP PLK SA), which operates as Infrastructure Manager and is
responsible for capacity allocation. Company is responsible for the national rail
network. The main responsibilities include network’s management, constructing
timetables, granting rail capacity to railway undertakings and repairing the network.
PKP PLK defines the infrastructure charges, which are finally approved by UTK. As
Infrastructure Managers all around the Europe, PKP PLK is responsible for publishing
the Network Statement. (PKP PLK, 2009; Steer Davies Gleave Poland, 2003)
The lowest level includes the railway undertakings; the incumbent and the private
undertakings that entered the market after the liberalization. PKP group is presented by
two companies: PKP Cargo SA, which is the main actor in the Polish railway market
and PKP LHS, which operates in wide gauge line in south-east Poland. (PKP Cargo,
2009; PKP LHS, 2009; Steer Davies Gleave Poland, 2003) The amount of private
railway undertakings started to increase in 2003, when the concessions were replaced by
licenses; during 2003–2005, new entrants conceded 57 licences. In the end of year 2005
Polish railway freight market had 65 railway undertakings, which is one of the highest
numbers in whole Europe. Today the number is over 90 (Wrobel, J & Imieninska, J
2009, pers. comm., 25 March). Although new entrants have entered the markets, the
dominant actor is PKP Cargo S.A., part of the old PKP company, which held the
monopoly power before the deregulation process. PKP Cargo’s market share measured
in tonne kilometres was 87.8 per cent in 2005. (Wronka, 2007) However, in 2007 PKP
Cargo’s market share dropped 2.5 per cent from the previous year, while the main
competitors, CTL Logistics (+0.6 %) and PCC Rail (+0.4 %), managed to improve their
shares (Melck, 2008). The situation in the end of year 2008 is presented in figure 7.
36
22 %
PKP Cargo
Private railway
undertakings
78 %
Figure 7
Market shares in Poland / PKP Cargo versus private undertakings
(Adapted from ZDG TOR, 2009).
The private railway undertakings’ market share in the end of the year was 22 per cent.
Although over 90 undertakings have an operating license, 49 are counted as active
players. (Wrobel, J & Imieninska, J 2009, pers. comm., 25 March). A recent list of
active railway undertakings in Polish railway freight market is provided in appendix 7.
The market share between the private railway undertakings is described in table 3.
Table 3
Structure of transport performance in 2008, private railway undertakings
(Adapted from ZDG TOR, 2009)
Railway undertaking
CTL
PCC PTKiGK Rybnik
Lotos Kolej
PTK Holding
PKN Orlen
Pol-Miedz-Trans
Rail Polska
Freightliner
Others
Market share / %
27.1
25.4
18.5
10.5
5.8
4.2
2.6
1.9
4.0
Table 3 notes clearly the structure of Polish railway freight market. In addition to PKP
Cargo, three bigger players operate on the market. Five railway undertakings have
market share between 10.5 and 1.9 per cent, all the other undertakings’ market share is
only 4 per cent.
One of the key characteristics in Polish railway freight market is internationalization.
Over 20 railway undertakings have operations abroad, mainly in Germany and Czech
37
Republic. (Imieninska, J 2009, pers. comm., March 25) Country’s location in central
Europe is ideal for the international traffic.
2.5
Finland
The Railway Act (L555/2006) is often seen as the core of Finnish railway legislation.
The Act came into effect in September 2006, and it interlinked the previous Railway
Act (198/2003) and the directive on the interoperability of the trans-European
conventional railway system. The Railway Act mobilized in 2003 was nationally used
to implement the first Railway Package. By the same token, the latter Railway Act was
used to nationally implement the second Railway Package. However, the Railway Act
which came into force in 2006, had another important meaning: with effect from 1
January 2007, it opened the national railway freight market for competition in Finland.
(L555/2006; Mäkitalo, 2007)
The operators on the Finnish railway market are the Finnish Ministry of Transport and
Communications, the Finnish Rail Administration, the Finnish Rail Agency, the railway
undertakings as well as railway construction companies. This is illustrated in figure 8.
Ministry of Transport and
Communications
Finnish Rail
Administration
Finnish
Rail Agency
Railway operators
Railway construction
companies
Figure 8
Operators in the Finnish Railway sector (Mäkitalo, 2007, p. 21)
The Ministry of Transport and Communication can be seen as a parent organization in
the Finnish railway sector. The Ministry is responsible for general control and
supervision of the railway industry: it manages the railway maintenance funds, and is
responsible for supervision of the Finnish Rail Administration and the Finnish Rail
Agency. Additionally, ministry is responsible for conceding licenses for railway
undertakings. (LVM, 2009; Mäkitalo, 2007)
38
The Finnish Rail Administration is the Infrastructure Manager of the state-owned rail
network. The main responsibilities include maintaining and developing the rail network
and allocating the rail capacity. In addition, the Finnish Rail Administration is in charge
of traffic control and passenger information. (Mäkitalo, 2007; RHK, 2009) Furthermore,
the Finnish Rail Administration is obliged to publish the Network Statement, which is
published in accordance with the Railway Act and European Union Directive 91/14/EC.
The Network Statement is published annually; the publication for the timetable period
2010 is the seventh published Network Statement in Finland. The main objective of the
Network Statement (RHK, the Network Statement, 2008) is to “describe the access
conditions, state-owned rail network, capacity allocation, services supplied to railway
undertakings and the basis on which the infrastructure charge is determined.”
Additionally, the publication defines “the general rules, deadlines, procedures and
grounds applicable to capacity allocation and the charging systems.” (RHK, the
Network Statement 2008)
The Finnish Rail Agency is responsible for monitoring the overall safety issues,
including general railway safety, the safety of railway systems and the safety of
operations handled by railway undertakings and rail network administrations. According
to the European Union safety directive, every member state is obliged to have a safety
authority that is independent of the Infrastructure Manager and railway undertakings.
Therefore, the Finnish Rail Agency was established in connection with the effectuation
of the second Railway Package in 2006. (Mäkitalo, 2007; RHK, 2008)
The two latter operators in the Finnish railway sector are the railway undertakings and
railway construction companies. Railway undertaking is defined in Railway Act as a
private-owned railway company or other corporation, which operates railway transport
as its major business and controls the needed rolling stock. Today only one railway
undertaking, VR Cargo which belongs to governmentally owned VR Limited, operates
on the Finnish market. (L555/2006; Mäkitalo, 2007; VR Limited, 2009)
39
3
MARKET ENTRY AND BARRIERS TO ENTRY
3.1
Competition and different forms of markets
”In every great monarchy in Europe the sale of the Crown lands would deliver a much
greater revenue than any which these lands ever afforded to the Crown… When the
Crown lands had become private property, they would, in the course of few years,
become well improved and well cultivated.”
Adam Smith, The Wealth of Nations (1776; p. 370– 371)
Adam Smith, who is widely considered as the father of modern economics, described in
1776 in his book “The Wealth of Nations” how situation would improve if lands would
be privatized (Farmer, 1997; Begg et al., 1994; 313; Smith & McCulloch, 1863). This
publication is often regarded as the basics for classical political economics, and it is
considered as an original work for economics as a separate field of science.
Railway is often cited as a nationalized7 industry, among steel, banking and oil. These
types of industries tend to be capital-intensive; due to the presence of large capital costs
that generates the economics of scale, many of the nationalized industries are natural
monopolies. There has been a distinctive difference between European countries and
United States: European countries used to acquire public ownership of natural
monopolies, US preferred to utilize public regulation. Hence, when countries noticed
public sector was too involved in the economy, the actions varied. European countries
turned to privatization, whereas US stress was on deregulation, which started in 1978
with airlines. Railway followed in 1980. (Begg et al., 1994; 313-314; OECD, 1997) The
Swedish Parliament decided to nationalize the railway in 1939, in order to ensure stable
economic situation. According to Edström & Tullberg (1998), this was a starting point
for modern Swedish railway. In UK the process occurred in 1947, when private railway
undertakings were nationalized into British Rail. (Edström & Tullberg, 1998; Hatano,
2004)
The two extreme opposite ends in the market structure are perfect competition and
monopoly or monopsony. By perfectly competitive market Begg et al. (1994) signify a
structure where both buyer and seller believe that their own decision have no effect on
the market price. A monopolist is the only seller in certain industry; a monopsonist is
the only buyer in that industry. In between the extreme opposites stand monopolistic
competition and oligopoly. Broader term of monopolistic competition, oligopoly and
monopoly is imperfect competition. Basically it means a company cannot sell as much
as it wants on a certain price. The output price depends on the quantity of goods
produced and sold. (Baye, 2005; Begg et al., 1994; 132–157) Table 4 illustrates the
market structure more precisely.
7
Nationalization = act of taking an industry into a public ownership of national government or state
40
Table 4
Market structure (Adapted from Baye, 2005 & Begg et al., 1994; 157)
Characteristic
Perfect
competition
Monopolistic
competition
Oligopoly
Monopoly
Number of firms
Many
Many
Few
One
Ability to affect price
None
Limited
Some
Considerable
Entry barriers
None
None
Product
Example
Complete
Homogeneous
Some
Homogeneous
/
Differentiated Differentiated
Agriculture
Fast-food
Post office
Cars
Only one
Perfect competition
In a perfectly competitive market nobody believes their own actions have an effect on
market price. There are many buyers and sellers in the market and each of them
produces a homogeneous product. Perfectly competitive market faces no entry barriers;
there is free entry into and exit from the market. Since all companies sell identical
product or produce identical service, customers view all products available in the
market as perfect substitutes. Perfect information ascertains consumers have inclusive
knowledge about quality and price of each company’s product. Because there are no
transaction costs, all companies charge the same price for the product or service. Since
there are no entry barriers, additional firms can enter the market effortlessly. Equally,
firms can exit the market easily. (Baye, 2005; 266–268; Begg et al., 1994; 132 – 133)
According to Mäkitalo (2007), Finnish railway freight transport does not fulfill perfect
competition’s prerequisites.
Monopolistic competition
An industry with monopolistic competition has many sellers producing close, but not
perfect substitutes. Companies can influence their market shares to some extent by
changing the price relative to its competitors. Companies utilize product differentiation,
which might be based on brands, location or tastes. There are no barriers to entry, which
enables companies to enter and exit the market easily. The demand curve is downwardsloping, stating companies must reduce products’ price in order to increase sales. (Baye,
2005, 296–297; Begg et al., 1994, 156–160)
Oligopoly
Oligopoly refers to a market where there are few large companies acting in the industry.
Producer’s price depends not merely on its own output but also on its main competitors’
actions. Therefore companies’ supply decision depends on guess how its rivals will
react. (Begg et al., 1994, 156 – 162) Depending on oligopolistic model, products may be
either homogeneous or differentiated. However, barriers to entry exist in all models.
Namely, the models are Sweezy, Cournot, Stackelberg and Bertrand oligopoly. (Baye,
2005, 315–338)
41
Monopoly
Monopoly refers to a situation where only one player serves the entire market. There are
no close substitutes and therefore monopolist is able to charge any price. (Begg et al.,
1994, 132) Since all customers demand the product or service from the monopolist, the
market demand curve is the same as the demand curve for the product. Generally, this
means the consumers can choose only the price – quantity combinations among the
curve. Monopolist can increase sales only by lowering the price. If price requested is too
high, consumers might decide to buy nothing. (Baye, 2005; 280–282)
According to Begg et al. (1994), government legislation can influence on market
structure. Nationalized industries are exclusive licensed producers and therefore legal
monopolies. Patents may allow transient monopoly. In a case of nationalized industry,
state decides price and output. Railway industry used to belong to this group. (Begg et
al., 1994; 132–145; 157)
Natural monopoly
Monopoly originating from substantial fixed costs and economies of scale is called a
natural monopoly. It is a market structure where the most effective market condition is
achieved only by one producer. Although there might have been several competitors in
the beginning, market forces allow only one company to survive. (Baye, 2005, 562;
Begg et al., 1994, 157, 304) According to several studies (see De Jorge & Suarez, 2003;
Mäkitalo, 2007; Tyrrall 2004) railway transport is a good example of natural monopoly,
due to large fixed costs and need for capital guiding to economies of scale. According to
Mäkitalo (2007), earlier was regarded that railway transport and construction would be
organized in most effective manner if only one company would offer the services. The
vertical separation, namely separating transport and maintenance, would rescind the
natural monopoly, though economies of scale are connected to the operation of railway
transport. Mäkitalo (2007) states vertical separation admits small operators to enter the
market and offer transport services. Only imperative is to acquire a small rolling stock.
(Mäkitalo, 2007)
3.2
Market entry barriers
The history behind the barriers to entry leads back to 1936, when Donald H. Wallace
proposed in his study (Wallace, 1936, 83) “The nature and extent of barriers to free
entry needs thorough study”. In 1949, thirteen years later, Joe S. Bain published a book
which can be classified as a starting point for entry barriers’ theoretical study. In his
article (Bain, 1949) the researcher introduced first time the conclusion that potential
competition may lead established companies to sacrifice present profits in order to
prevent entry. Although Bain published this first article already in 1949, several
researchers (see Baron, 1973; McAfee et al., 2004; Pehrsson, 2009; Schmalensee, 1981)
think Bain pioneered the barriers to entry theory only in 1956 when his book “Barriers
to New Competition” was published. In his book Bain (1956) investigated market entry
barriers created by 1) product differentiation, 2) absolute cost advantages, and 3)
economies of large scale operations (Baron, 1973). Table 5 lists the definitions of
barriers to entry stated by various authors.
42
Table 5
Authors’ definitions of “barriers to entry” (Adapted from McAfee et al.,
2004, 461–463; von Weizsäcker, 1980, 13)
Author
Definition
Bain (1956)
"A barrier to entry is an advantage established sellers in an industry over
potential entrant sellers, which is reflected in the extent to which
established sellers can persistently raise their prices above competitive
levels without attracting new firms to enter the industry."
"A barrier to entry is a cost of producing (at some or every rate of output)
that must be borne by firms seeking to enter an industry but is not borne
by firms already in the industry."
"A barrier to entry is a factor that makes entry unprofitable while
permitting established firms to set prices above marginal cost, and to
persistently earn monopoly return."
"A barrier to entry is anything that prevents entry when entry is socially
beneficial."
"A barrier to entry is a cost of producing that must be borne by a firm
seeking to enter an industry but is not borne by firms already in the
industry, and that implies a distortion in the allocation of resources from
the social point of view."
“Barriers to entry into a market then can be defined to be socially
undesirable limitations to entry resources which are due to protection of
resource owners already in the market.”
"An entry barrier is a rent that is derived from incumbency."
Stigler (1968)
Ferguson (1974)
Fisher (1979)
von Weizsäcker
(1980)
von Weizsäcker
(1980, p. 13)
Gilbert (1989)
Carlton & Perloff
(1994)
McAfee et al.
(2004)
McAfee et al.
(2004)
"A barrier to entry is anything that prevents an entrepreneur from
instantaneously creating a new firm in a market. A long-run barrier to
entry is a cost necessarily incurred by a new entrant that incumbents do
not (or have not had to) bear."
"An economic barrier to entry is a cost that must be incurred by a new
entrant and that incumbents do not or have not had to incur."
"An antitrust barrier to entry is a cost that delays entry and thereby
reduces social welfare relative to immediate but equally costly entry."
As illustrated in table 5, barriers to entry are defined several ways. However, in all
definitions costs are mentioned one way or another. Additionally McAfee et al. (2004)
divided barriers into economic and antitrust barriers. According to authors, all economic
entry barriers are antitrust barriers, but not all antitrust barriers are economic barriers.
Same trend is on display when comparing two schools which are recognized in the field
of research on competition and market entry barriers. Harvard school’s best-known
researcher is Joe S. Bain and Chicago school’s George Stigler. The main difference
between these two schools is that Bain’s definition refers to a market situation where
price level is higher than in the competitive situation; Stigler’s definition concentrates
on costs which arises for the new entrant, but not for the company already operating on
the market. Stigler’s explication is narrower than Bain’s: some costs are barriers in
compliance with Bain and not according to Stigler; but all barriers stated by Stigler meet
Bain’s definition. (McAfee et al., 2004; Mäkitalo, 2007)
43
Pehrsson (2009), building on insights of Shepherd (1979), has recently stated a barrier
to entry can be classified exogenous or endogenous. Exogenous barriers are the ones
that are entrenched in the underlying market conditions. Therefore, companies cannot
control barriers at issue. These include for example incumbents’ product differentiation,
need for capital for the establishment, customers’ switching costs, number of
competitors and government policy. On the contrary, endogenous barriers are generated
by the companies through the market strategies and the competitive behavior. These
barriers are based on incumbents’ reactions towards new entrants’ establishment plans,
for example incumbents’ price competition and its reactions in general. (Pehrsson,
2009) Nonetheless, Gable et al. (1995) state the entry barrier types are often reinforcing,
which might complicate the interpretation.
According to earlier studies (Brewer, 1996; Ludvigsen & Osland, 2009; Mortimer et al.,
2009; Mäkitalo, 2007; Steer Davies Gleave Sweden, 2003), the main barriers to entry in
railway market are exogenous barriers: acquiring the rolling stock and bureaucracy.
However, in addition there are differences between countries. Brewer’s study (1996)
revealed the perceived level of access charges was seen a barrier in UK. In Finland
(Mäkitalo, 2007) and Sweden (Steer Davies Gleave Sweden, 2003) researches estimated
the difficulty of accessing the services creates a great market entry barrier. Cantos &
Campos (2005) stated intermodal competition can create the market entry barriers.
Same trend was seen already before the deregulation, which is visible in a working
paper done by Nash & Preston (1992). They found out the main barriers to entry at that
time were a lack of second hand rolling stock market, access to maintenance and depot
facilities and sunk costs of infrastructure (Nash & Preston, 1992). Worth mentioning is
the congruent line with Mäkitalo’s results: although the time gap between the studies is
fifteen years, as major barriers to entry were concluded rolling stock and access to
maintenance and depot facilities. (Mäkitalo, 2007; Nash & Preston, 1992)
3.3
Market entry strategies
Pehrsson (2009) presented in his recent article a model which proposes a relationship
between barriers to entry, incumbents’ market strategies and the market strategy of new
entrant. Model is illustrated in figure 9.
44
Market
strategy
of new
entrant
Barriers
to entry
Incumbents’
market
strategies
Figure 9
Correlation between market strategies and barrier to entry (Adapted from
Pehrsson, 2009)
Pehrsson (2009), building on insights of Hambrick (1983) and Peteraf & Reed (2007),
adapts in figure 9 a contingency perspective. The model proposes that new entrant’s
market entry strategy is contingent on the external conditions of market entry barriers.
The model also assumes that competition constitutes the main source of entry barriers.
Therefore model proposes influence between incumbent company’s strategy and
barriers to entry. In addition, the entry timing plays a big role in Pehrsson’s model.
Several researchers (see for example Kotler, 1988; Makadok, 1998; Pehrsson, 2004)
noted the entry strategies differ depending on timing. Company entering the market first
enjoys “first mover advantages”, compounded of locking up key customers and gaining
potential reputational leadership. Generally, it is harder for new operators to match the
performance of the first entrant and attract customers due to extensive customer
loyalties asserted previously. (Kotler, 1988, 436; Pehrsson, 2009)
Incumbents and new entrants utilize certain market entry strategies. Miller (1987)
concluded the main factors of strategy were product / market scope, product innovation,
differentiation and cost control. Product / market scope is equivalent to breadth of
business activities, which basically means the extent of product and customer types.
Innovation is a modern way to differentiate the product (Kustin, 2004); authors have
noted services are also a key to differentiation (Pehrsson, 2009). Porter (1980) states
price is also regularly subject to differentiation.
Koch (2001) presented a model which divides the factors influencing market entry
mode selection to external, internal and mixed categories. The main aspects are gathered
to table 6.
45
Table 6
Factors having an effect on market entry mode selection (Adapted from
Koch, 2001)
Category
Factor
External
Environment characteristics
Market barriers
Internal
Company size / resources
Market entry experience
Management risk attitudes
Market share targets
Mixed
Profit targets
Competencies, capabilities and skills required /
available
Sufficiency and reliability of information inputs
The main external factors are environment characteristics and market barriers. As
highlighted in chapter 3.2, the breadth of market barriers is remarkable. However, in the
first stage the governmental regulations are the main entry barrier: market needs to be
deregulated and open for competition in order to enter. The information available
concerning the market environment is essential, in order to understand the niches or
other potentials the market can offer. (Koch, 2001; Kotler et al., 1986, 249, 252–253;
Kotler, 1988, 170)
Generally, small companies have limited choices of entry modes due to lack of
resources (Benito & Welch, 1994). Another important internal factor is market entry
experience: personnel’s considerable knowledge of an entry process is vital when
deciding the entry mode. Company’s financial situation and managements’ attitude
towards risks also affects on the process. Conjoined with market share and profit
targets, companies can evaluate the contingencies and choose a model delivering the
best possible profit. In accordance with name, mixed factors combine internal and
external elements, such as competences and capabilities. (Koch, 2001)
After company has evaluated the factors affecting on the market entry mode selection
and is aware of own strengths and weaknesses, the next step is to decide which strategy
to use when entering the markets. Naturally, if company in question is a start-up, the
entrepreneur’s background and knowledge presents a big part. Mitchell (1988)
concluded behind the most successful companies are founders who integrate their
personal goals and objects of interest into company’s operations and strategy.
According to study made in UK (Robertson et al., 2003), the most critical factors to
start-ups are motivation, idea and market. Same research concluded the main obstruct is
finance: over 50 per cent of interviewees stated it as a major concern (Robertson et al.,
2003). Macht & Robinson (2009) & Sørheim (2005) have also concluded the start-ups
face considerable challenges in achieving long-term finance. Sørheim (2005), building
on insights of Binks (1996), states the entrepreneurial firms’ limited history creates
barriers, because their future is hard to predict. Therefore external financing is
46
indispensable. In addition to financing by banks, start-ups can pursue help from venture
capitals or private persons. Private, wealthy individuals who invest money and
experience in small start-ups with which they have no family bonds are called business
angels (Deakins, 1996). The finance provided by business angels is referred to
“informal venture capital”; similar to formal venture capitalists, business angels
classically invest money in return for an equity investment in the company (Wiltbank,
2005).
Already existing companies can use various strategies to enter the markets. Vertical
integration, strategic alliances and subsidiaries are the mostly used forms (Blomstermo
et al., 2006; Kotler, 1988; Kotler, 2000; Lee et al., 2000; Mäkitalo, 2007). Vertical
integration can be either backward or forward integration; main users of this tactics are
oil producers and mining companies. Generally vertical integration lowers costs and
companies can gain a larger share of value-added streams. In addition, engaging vertical
integration companies can manipulate prices. Disadvantages include high costs in some
parts of value chain and a lack of flexibility. (Kotler, 2000, 222)
Hertz (1996) defines strategic alliance as “a relationship between two organizations
that bas some impact on the total network of the industry and will lead to changes in the
network positions of the organizations involved in the strategic alliance”. Lee et al.
(2000) found in their study that strategic alliances are an effective entry-cum-deterrence
strategy for SMEs (small and medium-size enterprises) to successfully enter the markets
which are dominated by major corporations. Kotler (1988) presents Biggadike’s
research (1977), which concluded companies entering a market that is already occupied
by incumbent firms should use following marketing mix:
−
−
−
−
−
−
−
Higher prices and higher quality
Narrower product line
Narrower market segment
Similar distribution channels
Superior service
Lower expenditure on sales force, advertising and promotion
(Kotler, 1988, 344)
During the last decades service firms’ internationalization process has faced a growing
interest in researching (Aharoni & Nachum, 2000; Blomstermo et al., 2006; Dawson,
2001). Generally, service firms may enter foreign markets using various entry modes,
for example licensing, joint ventures or by establishing a subsidiary. According to
Blomstermo et al. (2006), the choice of entry mode is critical and closely related to
control. Control is determining as it ascertains achievement of the organizations’
purpose. Control also determines risks and returns. (Blomstermo et al., 2006)
In order to secure a lasting, defensible position in the market place, companies must use
positioning. Positioning embodies presenting unique set of products or services and
making sure the target market has cognizance of them. Positioning can be achieved by
several strategies: building on present strengths, creating a niche or relocating
47
competitors. The position strategy chosen needs a careful selection. (Kotler &
Andreasen, 2000)
Companies can be classified by the role they play in the target market. Classifications
are leader, challenger, follower and nicher (Kotler 2000). Market leader has the largest
market share and it normally leads in price changes, distribution coverage and
promotional intensity. However, unless a dominant company enjoys a legal monopoly,
its situation might not be so easy. Market leader must maintain vigilance, due to
product/service innovations and competition. (Kotler, 1988, 318–320; Kotler, 2000,
230–232; Tse et al., 2004)
Market challengers are the companies ranking second, third or fourth in an industry
classification. They are often also called runner-ups or trailing companies. Challengers
must define carefully whom to attack: it can attack the market leader, firms of its own
size or small regional firms. The attack strategy needs to be chosen carefully. In order to
succeed, companies can reinforce their strategies for example by price-discount, lower
price goods, improved services or intensive advertising promotion. (Kotler, 1988, 330–
339; Kotler, 2000, 240–244; McDonald & Roberts, 1992)
Many companies prefer to follow the leader and use the way market leaders and
challengers have unfolded. By using the follower strategy, company avoids the
expenses of developing a new product; educating the market and distribution. Although
follower follows the path unfolded by someone else, it does not mean market followers
lack strategies. They must know how to keep current customers and attract new
customers. Every market follower tries to give distinctive advantages to the target
market, e.g. location or services. However, if the follower does not want to follow
others in large market, an alternative is to be a leader in a smaller market. Generally,
small companies avoid competition with large players and therefore target on small
markets, niches. Niching strategy’s main risk is that the market dries up or is attacked.
In this case, company is fixed with special resources that might not have high-value
alternative use. (Kotler, 1988, 339–344; Kotler, 2000, 244–247)
Kotler (2000) reminds although focusing on competitors is important, companies can be
classified into two types: competitor-oriented and customer-centered. Customercentered company has a better position to identify new opportunities. By overseeing
customers’ needs, it can decide which needs are most important to serve with possible
resources and objectives. (Kotler 2000, 247–249)
Brewer (1996) conducted a survey concentrating on the organizations utilizing railway
freight services during summer and autumn 1994. Researcher received 72 answers from
178 distributed, which gives responsive rate 40.4 per cent. According to Brewer’s
research (1996), a vast majority of respondents think the market entry is “not very easy”
(27) or “not at all easy” (18). At that time, three respondents thought entry process is
“quite easy”. Answers concerning likely methods of entry and easiest perceived
methods of entry reflect the same result: sub-contract operations were seen as the best
choice, over to own account operations and third-party / multi-uses basis. (Brewer,
1996)
48
3.4
Tools and framework to analyze industry
3.4.1 Strategic groups
The main difference between companies operating in an industry is their competitive
strategy. According to Feka et al. (1997), pursued competitive strategy is directed from
companies’ strengths and weaknesses; therefore companies having similar dimensions
as strengths and weaknesses are likely to follow similar strategies. This assumption
permits us to group the companies in an industry into strategic groups.
The term “strategic groups” was created by Michael S. Hunt in his doctoral dissertation
in 1972 and popularized by Michael E. Porter in 1980 (Hatten & Hatten, 1987, 330).
Feka et al. (1997) state Hunt defined strategic group as “a group of firms within the
industry that are highly symmetric with respect to cost structure, the degree of vertical
integration, and the degree of product differentiation, formal organization, control
systems and management rewards / punishments, and the personal views and
preferences for various possible outcomes” (Feka et al., 1997, 66). Porter (1980)
defines “strategic group is the group of firms in an industry following the same or
similar strategy along the strategic dimensions”. Porter clarifies the situation by an
example: if all companies follow the same strategy, an industry has only one strategic
group. At the other extreme end, each company would create an own strategic group.
Generally, there is small number of strategic groups which conquer the main differences
between the operators in the industry. By grouping companies into strategic groups their
structure can be examined and analyzed and its attractiveness can be checked. In
addition, the competition within the group and between groups can be studied.
According to Feka et al. (1997), clustering companies into strategic groups should be
started by examining company’s position against Porter’s five forces. By analyzing the
factors presented in chapter 3.3, company’s strengths and weaknesses can be isolated.
These factors recognize company’s position and its competence respond to industry.
Therefore, it leads to assumption that companies with similar strengths and weaknesses
may have identical competitive advantages, and they probably act alike in disorders in
their competitive environment. (Feka et al., 1997, 66–67; Porter, 1980, 129–130)
According to Porter (1979), strategic groups’ presence within an industry affects the
expected profit rates in several ways. Market entry barriers differ among strategic
groups; in addition, the presence of multiple strategic groups affects the competitive
rivalry. Porter (1979) stated the mutual dependence is noted more effortlessly within a
strategic group than between the groups; therefore the arrangement of the groups
defines how strong competition the groups will face. Stronger groups may have
preferable bargaining power with buyers and suppliers, which may lead to demand’s
lower cross elasticities with the substitute industries. (Porter, 1979, 214–215)
In his empirical study, Porter divided firms into two categories defined as industry
leaders and followers. Industry leaders were defined as the largest companies in the
industry which are characterized by strategies prospectively attaining economies of
scale, in-house workshop, vertical integration and national advertising. The followers
49
are likely to be specialized in regional strategies or niche-strategies. Therefore the
division conquers some distinction among strategic groups. (McGee & Thomas, 1986,
144–145; Porter, 1979, 220–221)
In compliance with McGee and Thomas (1986), the key characteristics of industry’s
structure are condensed in the idea of entry barriers. A company within a group makes a
strategic decision which cannot be duplicated by members of other strategic groups
without remarkable elapsed time, substantial costs or insecurity about the decision’s
outcomes. These group-specific entry barriers, called mobility barriers, provide
advantages to some companies over others. The mobility barriers can be denoted alike
conventional entry barriers; as Caves and Porter (1977, 250) state, “barriers to entry
then become specific to the group rather than protecting all firms in the industry
equally, and barriers to mobility between groups rest on the same structural features as
barriers to entry into any group from outside the industry”. Porter (1979) suggests the
fact entry barriers generalize to mobility barriers provides an explanation why some
companies are more profitable than others, and why companies adopt distinct strategies
although all the options are not equally successful. (Caves & Porter, 1977, 250; McGee
& Thomas, 1986, 150–151; Porter, 1979, 216; Porter, 1980, 132–135)
McGee and Thomas (1986) divide mobility barriers into three broad categories, which
are presented in table 7. Market-related strategies, characteristics of supply in the
industry and companies specific characteristics correspond to differentiation and costbased strategies at the business unit level, and to strategy characteristics at the corporate
level. (McGee and Thomas, 1986, 151)
50
Table 7
Sources of mobility barriers (Adapted from McGee & Thomas, 1986, 151)
Market-related strategies
Product line
User technologies
Market segmentation
Distribution channels
Brand names
Geographic coverage
Selling systems
Industry supply characteristics
Economies of scale:
- production
- marketing
- administration
Manufacturing processes
R & D capability
Marketing and distribution systems
Characteristics of firms
Ownership
Organization structure
Control systems
Management skills
Boundaries of firms
- diversification
- vertical integration
Firm size
Relationships with influence groups
Market-related strategies include product line, technologies typifying the product,
geographical coverage of the market and the segments served, the distribution channels,
product differentiation and branding as a whole and the selling systems, including the
relationships with the buyers. McGee and Thomas (1986) classify into industry supply
characteristics the economies of scale arising from production, marketing and
administration, manufacturing processes, including technological capability, R & D
expenditure and marketing and distribution systems. The third category is comprised of
firm characteristics, including the ownership and organizational structures, management
skills, control systems, the size of the firm, diversification and vertical integration of
firm’s boundaries and the relationship with the influence groups. (McGee & Thomas,
1986, 151–153)
Several studies (see Mahon & Murray, 1981; Porter, 1980; Smith & Grimm, 1987;
Smith & Grimm, 1991) have noted companies should change the strategy used when the
environment changes. Especially the transition from regulated to deregulated
environment is a significant change for a company. Smith and Grimm (1987) examined
the strategic management of US railways in 1984 by a mail survey which was sent to all
members of National Industrial Transportation League’s railway transportation
51
committee, altogether 180 railway shippers. The committee was seen as a good sample,
because it consisted of directors of transportation and distribution of the largest
customers’ in railway industry. Among the customers were such companies as Ford
Motor Company and Union Carbide. 58 per cent of the committee responded, providing
totally 245 evaluations on 27 railways. The sampling accounted for 90 per cent of total
US railway revenue and included all the largest companies. In the questionnaire the
experts had to evaluate the relative performance of each railway on a scale of one to five
both before and after the deregulation. The researchers classified the answers to five
different clusters, presented in table 8. (Smith & Grimm, 1987, 369–372)
Table 8
Five railway strategies by Smith and Grimm (Adapted from Smith &
Grimm, 1987, 369 – 372)
Type
Strategy name
Highest scores in…
Focused
Leadership strategy
Marketing, service quality and low prices
Focused
Innovation strategy
Innovation dimension
Focused
Quality differentiation strategy
Product dependability and customer service
Unfocused
Contingency strategy
middle on all dimensions
Unfocused
Unfocused follower strategy
low scores on all dimensions
The first three strategies are focused, signifying they stand for a focus on one or more
strategic dimensions. The two latter strategies do not concentrate on any dimensions but
scores alike to all variables. Companies in the first cluster received high scores on
marketing, service quality and low prices; they concentrated on all three dimensions.
Researcher’s named the first cluster leadership strategy. The second cluster
concentrated more on innovation than other dimensions, especially in customer service
and relations. The cluster was named innovation strategy. The last focused group
concentrated on product dependability and customer service, named quality
differentiation strategy. The two latter strategies were grouped to unfocused strategies.
The fourth group scored middle in all dimensions, enabling companies in this group to
move in whatever direction was seen the most profitable while environment was
changing. Therefore, a name contingency strategy was given. The last group gained low
result in all dimensions, without having a clear attention to any indicators. The strategy
was named unfocused follower strategy –although Smith and Grimm (1987) argued if it
can be called a strategy at all. (Smith & Grimm, 1987)
Smith’s and Grimm’s (1987) main finding was that only few firms followed focused
strategies in regulated environment. Although several companies made strategic
changes in order to react to deregulation, there was still seen a lack of strategic focus
when compared to other deregulated industries. Earlier deregulation, seven companies
out of the sample of 27 used focused strategies; eight companies pursued them after the
deregulation process. Overall, 57 per cent of studied companies (15 firms out of 27)
changed the strategy. Smith and Grimm (1987) concluded the changes do not occur
rapidly: a long time is needed in order to adjust to new market situation after decades of
stable regulation. The study also revealed the companies which did change the strategies
outperformed. Smith and Grimm (1987) discovered the most profitable change was
52
from unfocused follower strategy to an innovation strategy. This finding supported the
aim of the deregulation, which was to encourage innovation. In the second research,
Smith and Grimm (1991) revealed that managers’ age and years of industry service had
a straight correlation with strategic change. Especially age seemed to have a significant
influence: the managers’ average age in companies which did not change the strategy
was 52.7 years and in companies which did change the strategy 50.4 years, giving t =
3.45 and p = 0.001. (Smith & Grimm, 1987; Smith & Grimm, 1991)
While strategic groups are discovered inside a market, strategic alliances provide an
important way of internationalization for transport companies. Building strategic
alliances has also been seen as a respectable way to enter the foreign markets. Therefore
transport companies have a history of developing, forming and even call off alliances
with other transport companies. The changed environments, due to deregulations and
harmonization, have changed the conditions. In order to increase the
internationalization, transport companies have strengthened the already existing
alliances and formed new alliances. Companies want to form more integrated network
for transport. However, finding a suitable partner is a hard job to do. For many
companies the know-how and intangible assets are the core resource. Therefore a
selection of a trustworthy partner is a crucial for company’s survival. (Hertz, 1996, Lee
et al., 2000)
3.4.2 Porter’s five forces
Company’s performance on the market can be evaluated from the point of view of
industry. According to Porter (1980), industry structure determines the strategies
prospectively available to the company. Especially forces outside the industry are
significant: because all operators of a certain industry are affected by the same forces,
the key question is to understand how different companies deal with them. If company
operates in an industry which faces competition, all factors affecting are originated from
the economic structure. This affects on the behavior of competitors. Porter (1980) states
the condition of competition depends on five basic competitive forces: entry, threat of
substitution, bargaining power of buyers, bargaining power of suppliers and rivalry
among current competitors. These forces reflect the fact competition is not only
between the downright competing companies; on the contrary all players, including
customers, suppliers, substitutes and new entrants must be noticed as competitors.
(Porter, 1980, 3–7) Figure 10 illustrates the five forces model adapted to railway freight
market.
53
NEW RAILWAY
UNDERTAKINGS
THREAT OF
NEW ENTRANTS
SUPPLIERS
OF E.G.
LOCOMOTIVES
BARGAINING
POWER OF
SUPPLIERS
RAILWAY
TRANSPORT
COMPETITORS
BARGAINING
POWER OF
BUYERS
RAILWAY
TRANSPORT
BUYERS
RIVALRY AMONG
EXISTING COMPANIES
THREAT OF
SUBSTITUTES
ROAD, AIR
AND SEA
TRANSPORT
Figure 10
Porter’s five forces adapted to railway freight transport (Adapted from
Mäkitalo, 2007; Porter, 1980)
The competition in an industry refers to operators providing similar products or
services. As Mäkitalo (2007) noted, the threat of new entrant is one of the central
competitive forces. The strength of threat depends on the market entry barriers and
existing competitors’ retaliation towards new entrants. According to Porter (1980), the
entry deterring price, properties of entry barriers and experience and scale as entry
barriers are also dimensions affecting on threat of entry. If entry barriers are high and/or
new entrant encounter strong reprisal from companies operating in the industry, the
threat of entry is low. (Järnvägsstyrelsen; 2007; Mäkitalo, 2007; Porter, 1980, 7, 14–15)
Porter categorizes market entry barriers to seven major sources, which are presented in
table 9.
54
Table 9
Barriers to entry (Porter, 1980, p. 7–13)
Barrier to
entry
Economies of
scale
Product
differentiation
Capital
requirements
Switching costs
Access to
distribution
channels
Cost
disadvantages
independent of
scale
Government
policy
Definition
Cost of producing an additional unit
of a product decreases as the
volume of output increases
Companies have competitive
advantage which differentiates
them from competitors
Need to invest large financial
resources
One-time costs facing the buyer
when switching from one supplier
to another
Need to secure distribution for
products
Example
Lower input costs (buying large
amount of product in a cheaper
price)
Strong brand, loyal customers,
product differences
Existing companies may have cost
advantages not replicable by
potential entrants
Proprietary product technology,
favourable locations
Production facilities, machinery,
inventories
Employee training costs,
machinery, technical help
Space in supermarket's shelf
Government can limit or close entry Licensing requirements, pollution
to certain markets by various ways
standards
Rivalry among existing competitors occurs when companies either feel the pressure or
see opportunities to improve the market position. Mainly used tactics include price
competition, advertising battles, product introductions or increased customer service.
According to Porter (1980) competitors are mutually dependent, signifying
counterparts’ actions on the market have noticeable effects on its competitors.
Additional factors affecting on the rivalry among existing competitors are high fixed
costs, diverse competitors and slow industry growth, to name few. Threat of substitutes
refers to other competitive industries, which offer alternative ways to perform the same
function. The price-performance attractiveness between the substitutes determines the
industry’s profits. (Porter, 1980, 17–24; Mäkitalo, 2007)
Generally bargaining power is the ability to influence on prices. Buyers are the actors
who create the demand for a certain product or service; suppliers are the companies
providing all needed sources for creating a certain product or service. The buyers and
suppliers pursue to maximize the profits by influencing on markets in several ways.
Buyers can force down prices, bargain for higher quality or more services and arrange
competitors against each other. According to Porter (1980), buyer group is powerful if
−
−
−
−
−
It purchases large volumes relative to vendor’s sales
The products it purchases represent a remarkable fragment of the buyer’s costs
The products purchased are standard or undifferentiated
It faces only few switching costs
Industry’s product or service does not affect on the quality of the buyer’s products
or services
55
− The buyer has full information
(Porter, 1980, 24–27)
Porter (1980) states the conditions turning suppliers powerful tend to reflect the factors
making buyers powerful. Therefore, supplier group is powerful if
− it is dominated by a few companies and is more concentrated than the industry it
sells to
− the supplier sells to numerous industries, it is not dependent on the certain industry
− the suppliers’ product has an important input to buyer’s business
− the supplier’s products are differentiated
(Porter, 1980, 27–29)
Many researches (see Casaca & Marlow, 2007, 307; Järnvägsstyrelsen, 2007; Mäkitalo,
2007) have used Porter’s five forces when analyzing the transport markets. According
to Järnvägsstyrelsen (2007), in Swedish market exist “gentlemanly competition”.
Mäkitalo (2007) stated Porter’s five forces model is ideal for characterizing the railway
markets. The model is suitable for railway freight market, because buyers have a
significant influence on the railway freight market and they create competition within
the industry. (Mäkitalo, 2007)
56
4
TRANSPORT INFRASTRUCTURE
Benson et al. (1994, 1) define transport as “that part of economic activity which is
concerned with increasing human satisfaction by changing the geographic position of
goods or people”. Raw materials are taken to places where the most cost-effective
manufacturing is available, or finished goods to places where most of the consumers are
located. As Benson et al. (1994) noted, “transport creates the utility of space”.
The term transport system includes functions as transport infrastructure and traffic
management. Actually, traffic management is seen as part of transport infrastructure,
together with transport networks, terminals and control systems. Different regulations,
organizations and transport modes are needed for traffic management. (Ministry of
Transport and Communications, 2002)
The main modes of transport are road, railway, sea, air and pipeline (Benton et al.,
1994). According to Hibbs (2003, 90), transport market is dominated by road transport.
Road haulage’s essential advantage when compared to railway or sea is door-to-door
services, which enables customers’ to receive the delivery to the certain terminal,
warehouse or other fixed location. If the transport journey is over 320 km, the
advantages of railway transport (high speed and low cost) exceed the disadvantages of
delays occurred due to terminal locations. (Benton et al., 1994) Additionally, the rail
network is shorter than road network.
Table 10 describes the rail network lengths in countries concerned. In addition to
network owned and maintained by the main Infrastructure Managers, all countries in
question have privately owned and maintained private sidings. The figure in Sweden is
1157 km and in Poland 906 km. In Finland the private sidings covers only dozen km.
(RHK, 2009; Stenbacka, H 2009, pers. comm., 11 May; Wrobel, J 2009, pers. comm.,
12 May)
Table 10
Network length in countries concerned (Banverket, 2009; PKP PLK,
2009; RHK, 2009)
Network length / km
Finland
5794
Poland
19201
Sweden
12821
Sea transport is mainly used for bulk cargo, such as coal, iron, steel products, chemicals
or timber, containers or cars. Shipping lines have various types of vessels: car carriers,
container or bulk vessels, tankers or LNG, vessels specialized in transporting liquefied
natural gas. In addition to long seaways, short-sea traffic covers the smaller areas. For
example, there is an active short sea service connecting countries like Finland, Sweden,
Russia and Estonia with Germany and Netherlands. (“K” Line, 2009) Air transports’
advantage is speed. However, due to high costs and exiguous space, air transport has
qualified as a transport mode for expensive, fragile or small goods. Pipeline is a unique
method of transport, due to the fact it combines the way, the unit of carriage and the
57
propulsion unit. Only the terminus (for example a tank farm) is separate. (Benton et al.,
1994)
250
200
150
100
50
0
1990
Figure 11
1995
2000
2005
2010
2015
2020
2025
2030
The assumed transport activity growth during 1990–2030, index 100 =
1990 (European Union, 2007)
Figure 11 illustrates the assumed transport activity growth in railway freight traffic in
Europe. According to EU’s prediction, the utilization of railway as a transport mode
will increase annually. There is a need for more environmentally friendly option, which
does not obstruct the traffic. Therefore the railway is a perfect solution. According to
EU (2007), the intention is to support the railway transport. Actually, this objective was
put into action already in 1992, when the first White Paper was published. (The White
Paper, 1992)
50
45
40
35
30
25
20
15
10
5
0
44
39
10
3
road
Figure 12
short-sea
rail
inland
The use of different transport modes (European Union, 2008)
58
Figure 12 describes the percentual utilization of different transport modes in European
Union member states in 2008. According to the research, 44 per cent of goods are
transported by road, 39 per cent by short-sea shipping, 10 per cent by railway and 3 per
cent by inland waterways. (European Union, 2008)
4.1
Sweden
In Sweden, the main transport mode is road. According to EuroStat (2009), in 2007 road
transport’s market share was 63.6 per cent. Same study stated railway cover the rest,
36.4 per cent (EuroStat, 2009).
45000
40000
35000
1000 tonnes
30000
25000
20000
1998 1999 2000 2001 2002 2003 2004 2005 2006
Figure 13
Goods transported by railway / Sweden (SIKA Institute, 2008)
Railway has increased the market share annually (see figure 13). In 2007, railway
transport amounted to 23.3 billion tonne kilometres, which is the highest result ever
achieved. The increase compared to year 2006 was 1.0 billion tonne kilometre. (SIKA
Institute, 2008)
4.2
Poland
According to The Economist Intelligence Unit (EIU) country profile 2007, the Polish
railway infrastructure needs substantial restructuring. However, railway is not the only
infrastructural system which is in bad shape. According to the EIU (2007), Poland’s
road network is one of the weakest aspects when reckon with the infrastructure.
However, road transport continues to increase its market share.
59
1000 tonnes
1%
1%
0%
17 %
railway
road
air
inland waterway
sea transport
81 %
Figure 14
Transported goods by mode of transport in Poland 2007 (Central
Statistical Office, 2008)
Figure 14 illustrates the split between transported goods in 2007. Road transport is the
superior market leader with 81 per cent, following by railway, 17 per cent. Both Inland
waterway and sea transport cover one per cent of whole transport amount. As figure
states, cargo volumes transported by air are minor (46 000 tonnes). (Central Statistical
Office, 2008)
United Nations Economic Commission for Europe (UNECE) stated by 2020 a strong
increase in transport demand is expected. UNECE (2009) predicts 1.6–2.1 per cent
increase for both railway and road transport. According to UNECE (2009), railway
transports’ main obstacles are
−
−
−
−
−
Need to encounter high environmental standards
Defective financial resources for investment projects
Limited existing potential of firms focused on railway designing and building
Need to implement several works in within a limited period of time
Need for advanced innovations and technologies, which are not available so far
However, the infrastructure is repaired and there is a hope for better future. One stroke
of luck was the Union of European Football Associations (UEFA) decision to hold the
Euro2012 tournament in Poland and Ukraine. This provides further incentives for the
government to improve both road and rail networks in the near future. (The UIC, 2007)
4.3
Finland
The main transport mode in Finland is road; in 2007 road transport covered 73.9 per
cent of whole transport traffic. Finland has some minor inland waterway transport,
which counts 0.3 per cent. Therefore, in 2007 railway transport market share was 25.9
per cent. (EuroStat, 2009)
60
27000
26000
25000
1000 tonnes
24000
23000
22000
1998
Figure 15
1999
2000
2001
2002
2003
2004
2005
2006
2007
Goods transported by railway in Finland, excluding Russian traffic (RHK,
2008)
Figure 15 illustrates the railway transport volumes in Finland (excluding the Russian
traffic) during 1998–2007. As visible, the last ten years railway transport has increased
its market share. The decline in 2005 can be explained by the strike in paper mills
during summer 2005, which basically stopped the whole paper transport in Finland. In
2008 VR Cargo transported in Finland 25.5 million tonnes, stating 2.7 per cent’s
decrease compared to year 2007. In 2008 the total railway freight traffic (including
traffic to/ from Russia and transit traffic) volume exceeded 41 million tonnes, increasing
4.1 per cent from year 2007. (TransPress, 2009)
61
Raideleveys / Spårvidd / Gauge
1524 / 1520 mm
1435 mm
Finland
Sweden
Russia
Norway
Estonia
Latvia
Denmark
Lithuania
Poland
Belarus
Germany
Figure 16
Gauge in Northern Europe (RHK, 2006)
One of Finland’s national peculiarities is the gauge (see figure 16). Eastern countries,
including Finland, Russia, Estonia, Lithuania, Latvia and Belorussia are using the wide
gauge, 1524/1520 mm. The other width used is 1435 mm which is used in Scandinavia
(Denmark, Norway and Sweden) and in main Europe, including Poland. Because
Finland’s geographical location can be counted as an island, the only possible
international railway traffic is in North-Finland with Sweden and Norway or in East
with Russia. (Finnish Rail Administration, 2006; Hilletofth et al., 2007) Russia and
Finland are utilizing this possibility: in 2008 transported volume exceeded 11 million
tonnes, stating 12.9 per cent’s increase. Transit traffic’s amount was 4.8 million tonnes,
increasing 35.4 per cent. (TransPress, 2009) At the moment the eastern border is
sheltered from competition, signifying only VR Cargo and the Russian Railways
(Российские железные дороги, RZD) can practice the transit traffic. However, the
Russian locomotives are not allowed to operate in Finland, the locomotives are changed
62
at the border. Additionally, Russian wagons needs to fulfill strict regulations in order to
get the permit to enter the Finnish rail network. However, the situation might change in
near future, as the agreement is to be reformed in the next few years. (Iikkanen, 2007) If
the transit traffic is deregulated, several Russian railway undertakings might enter the
Finnish market. The situation is interesting for the Finnish Rail Administration: in order
to be ready for future challenges, it is vital to understand how the other markets
encountered the situation after the liberalization.
63
5
RESEARCH ENVIRONMENT AND DATA GATHERING
5.1
Research approach
At the moment there are 17 railway undertakings that have a licence to practice railway
freight traffic in Sweden. Polish markets have more licensed undertakings: altogether
over 90 have the license, 49 are counted as active railway undertakings. Because the
research’s objective was to gather genuine information from the experts, a halfstructured theme interview was chosen as an interview type. According to Hirsjärvi et
al. (2004), by a test-interview themes’ adequacy can be confirmed and interview’s
duration can be checked.
Although all researchers avoid making mistakes, the results’ reliability and validity
might vary greatly. Therefore in every conducted research the reliability should be
questioned. According to Hirsjärvi et al. (2004), reliability means the repeatability of
the results. Basically this means if the same study is duplicated, there are no remarkable
discrepancies between the results. On the other hand, validity signifies the indicators or
research method’s ability to examine exactly the intended factors. Occasionally the
chosen research methods do not match the requirements to measure the intended factors.
For example, there might be misunderstanding in questions and answers, especially if
language barriers occur. (Hirsjärvi et al., 2004)
Research reliability was confirmed by recording all interviews. This ascertained the
availability of repetition. Questionnaire’s validity was checked by organizing a testinterview with a company that intends to enter the Finnish railway freight market in
2010. According to interviewee’s comments, few questions were added to the
questionnaire.
Lappeenranta University of Technology’s Kouvola Unit had gathered a list of railway
undertakings in Poland and Sweden for their previous researches. The same lists were
used; contact persons and railway undertaking details were re-checked. All railway
undertakings were contacted by sending a cover letter and information letter (see
appendix 1 and 2) by e-mail. Polish railway undertakings were contacted in English,
Swedish railway undertakings both Swedish and English. E-mail was sent to 16
Swedish railway undertakings (appendix 8). Due to number of railway undertakings on
the Polish market, an extensive sample was chosen for the research. Altogether 18
railway undertakings were contacted (appendix 9), including representatives from all
different types of railway undertakings: small undertakings concentrating on
transporting one product and large undertakings operating country widely. Hereby the
research’s validity was confirmed. A reminder was sent three days after the original email to railway undertakings that had not commented the participation. Railway
undertakings were contacted by phone one week after the first contact. If the person in
charge had not seen the information letter, it was e-mailed again. This ensured the
railway undertakings had time to familiarize with the research. All interviews were
agreed by e-mail. Around two weeks before a meeting questionnaire (appendix 3 and 4)
was sent to interviewee, in order to give railway undertakings some time to prepare.
One or two days before a meeting a confirmation e-mail was sent, making sure persons
in charge remembered the agreed interview.
64
5.2
Theme interview
Theme interview was introduced first time in 1956 by Merton, Fiske and Kendall in
their book “The Focused Interview”. According to authors (Merton et al., 1956: 3-4),
theme interview has following characteristics: 1) interviewees have experienced or are
well aware of certain phenomena, 2) researcher has preliminary knowledge about the
subject, 3) a framework for interview is settled and 4) interviewee has a subjective
experience about the topics concerned. Starting from 1980s theme interview has been
the mostly used interview method in business economics; often it is seen as synonym
for qualitative research (Koskinen et al., 2005, 105). Theme interview focuses on certain
themes; it is a semi-structured interview method, which is placed between a form
interview and an open interview. The interview proceeds in compliance with themes
without setting significance on single questions. There is no correct order to proceed:
the subject discussed transfers to next theme. In a good theme interview researcher can
deepen the conversation by concentrating on subjects related to the interviewee.
Additional questions can be added. Although, the exact form and order of the questions
is not important, theme interview is not as free as in depth-interview (Hirsjärvi &
Hurme, 2001: 47–48; 124).
The research has four main themes. All themes are divided into sub-themes in
chronological order. Questionnaire has more sub-themes than normally, due to extend
of the research and subjects researched. The four main themes follow the research’s
structure: company background represents the railway undertaking and market entry
surveys the market entry process. Infrastructure concentrates on the country’s transport
infrastructure and the role of European Union seeks answers to railway undertakings’
attitude towards the European Union legislation. Research main theme is market entry,
which is seen with five sub-themes. Sub-themes are divided in chronological order,
starting from time before entering the markets all the way till future prospects. Finally
last sub-theme concentrates on railway markets’ special characteristics, for example
traction power.
Theme interview was used in order to discover key problems, barriers and possibilities
when entering a railway market after the liberalization process. The intention was to
evaluate the results by three means: by comparing the outcomes inside a country, by
comparing the outcomes between two countries and by evaluating if railway
undertaking’s size influenced the results. The goal was to compare the results with
earlier studies, and see if primary data confirms the earlier results from secondary data.
5.3
Collecting the data
Persons selected for the interviews were railway market experts: either in railway
undertakings or Infrastructure Managers. Most of the interviewees had a long history in
railway industry: persons who had entered the markets recently had decade’s history in
logistics. Altogether were interviewed seven railway undertakings (nine persons) from
Sweden and eight railway undertakings (nine persons) from Poland. Additionally one
Lithuanian company was interviewed in order to create a view concerning the
cooperation between Lithuanian and Polish operators. Interviews were arranged by email and conducted in the interviewee’s offices except two, which were conducted at a
65
restaurant and in a hotel. All interviews were done during normal office hours, except
one interview which was made during the weekend. One interview was done totally in
Swedish; in three interviews some Swedish were used. In three interviews an interpreter
was present. Otherwise, all interviews were done in English.
Interviewees were told beforehand interview takes one to two hours. Generally duration
varied from 1.5 hours to two hours. The length varied a lot in Poland: the shortest
interview was 34 minutes; the longest took two hours 40 minutes. Before starting the
interviews, research’s background was described and the interviewee’s role was
clarified. Permissions to record the interviews were asked; it was received from 17
interviewees, one interviewee prohibited the recording. Table 11 and 12 presents the
time and date and the duration of the interviews. The list of interviewees is in Appendix
5.
Table 11
Interviews in Sweden: time, date and duration
Time and date
16.2.2009 at 13.00
19.2.2009 at 10.00
20.2.2009 at 12.30
23.2.2009 at 9.00
24.2.2009 at 10.00
25.2.2009 at 12.00
26.2.2009 at 13.00
Person 1
Person 2
Person 3 + 4
Person 5
Person 6
Person 7
Person 8
Duration
(minutes)
78
105
110
121
129
103
102
In addition to interviews, one railway undertaking sent further information by e-mail.
Table 12
Interviews in Poland: time, date and duration
Person 1
Person 2
Person 3
Person 4
Person 5
Person 6
Person 7
Person 8
Person 9 + 10
Time and date
16.3.2009 at 14.00
17.3.2009 at 12.00
18.3.2009 at 8.00
18.3.2009 at 13.15
20.3.2009 at 10.45
22.3.2009 at 08.30
23.3.2009 at 14.00
24.3.2009 at 10.00
25.3.2009 at 10.00
Duration
(minutes)
34
95
64
106
157
63
82
96
83
According to Koskinen et al. (2005), it must be considered carefully when the
recordings should be transcribed. Transcribing can be divided into five levels: first level
concentrates on receiving a general idea about the topic. Normally French lines are
used. On second level some quotations are collected but interview is not transcribed
from word to word than in level three. Level four differentiates entire situation: laugh,
66
silent speech and breaks. On the fifth level interview is videotaped and body language is
studied. (Koskinen et al., 2005: 319–324) In this research level two transcribing was
used: interview was not written from word-to-word but some quotations and comments
were collected. During an interview a short memo was written, which was
complemented by gathering data from the recordings. The summaries were sent to
interviewees for checking: this ensured the interviewee had given the correct
information and researcher had understood the information in an intended way.
5.4
Methods used to analyze the research data
There are several ways to analyze the gathered research data. According to Strauss &
Corbin (1990, 13), “analysis is the interplay between researchers and data”. Hirsjärvi
et al. (2004), building on Eskola (1975) state the research problem and analysis are
often congruent. Therefore, different actions are hard to perceive. In research, data’s
analysis, interpretation and drawing conclusions are the main parts: this is the main
target, the reason why research is conducted. (Hirsjärvi et al., 2004, 209)
Before the data can be analyzed, some preliminary work is needed. The process can be
divided into three sub-groups: 1. research data’s verification, 2. research data’s
augmentation and 3. research data’s arranging. Research data’s verification ascertains
the collected data is correct and all needed data is available. If there is a lack of
information and the data needs augmentation, researcher can contact the interviewees
again in order to gather the needed information. Before data is ready for analyzing, it
needs to be arranged. Research’s nature (is the method used qualitative or quantitative)
affects on the process: arranging qualitative data is time-consuming task, whereas
quantitative data can be organized effortlessly. (Hirsjärvi et al., 2004, 209–210)
Krippendorff (2004) states content analysis belongs to the most important research
techniques. It often refers to analyzing texts, for example interview transcripts; the main
intention is to understand what the gathered information means for people. According to
Patton (2002), content analysis is used to indicate any qualitative data reduction, which
main intention is to identify the core consistencies. For example case studies can be
content analyzed. (Patton, 2002)
Content analysis can either be inductive or deductive. Inductive analysis discerns
categories or themes in the data. The main difference to deductive analysis is that in
inductive approach, findings heave into sight of the data, whereas in deductive analysis
the data is analyzed according to existent framework. Often qualitative analysis is
inductive by nature. (Krippendorff, 2004; Patton, 2002, 453)
This research utilizes inductive analysis. By using semi-structured theme interview,
topics were categorized already in the early stage of the research. Research’s main
intention is to carefully study the topics which emerge out from the data. Additionally,
this research tries to deliver novel data by investigating how respondents experienced
the deregulation process.
67
6
EMPIRICAL PART
6.1
Sweden
In Sweden were interviewed altogether seven operators, six railway undertakings and
the Swedish Rail Administration, Banverket. Due to operators’ different nature, only
railway undertakings are included in the table below. Banverket’s results are discussed
separately.
Table 13 represents the main findings from Sweden. All thematic entities, divided into
groups according to theme interview’s model, are discussed more deeply later on in this
chapter.
Table 13 Main findings / Sweden
Measure
Company A
Company B Company C Company D Company E
Company F
Knowledge about railway
market before entering
Why company entered railway
industry?
Excellent
Excellent
Excellent
Excellent
Excellent
Excellent
Customer
Customer
Customer
Customer
Customer
Old SJ
Rolling stock - where gathered
when started the business?
SJ old
SJ old
SJ old
SJ
Rolling stock
SJ
Find
Bureaucracy customer
2nd hand
GC (SJ) +
new
SJ old
Personnel's background
Acquisition
Acquired +
SJ
Rail
capacity
Investments
Investments
Locomotives Locomotives Bureaucracy Bureaucracy
Main market barriers
SJ
Bureaucracy
Stations
SJ
Locomotives Investments
Capacity
Bureaucracy
Problems and difficulties faced
when entered the markets
No
No
No
XXX
Demand
Strong
financial
Demand
XXX
Company's strengths
Costs /
capacity
only 1
customer
Flexibility
Personnel
Foundation
Company's weaknesses
background
Old rolling
stock
Cooperation
only 1
customer
Money
Size
Positive matters faced when
entered the markets
Bureaucracy XXX
Money
Positive
attitude
Brand,
innovative
locomotive
fleet
Door-todoor
Few
customers
Network
Skills,
knowledge
Age and
size ->
Time to
market!
XXX
Cooperation with other
operators?
Some
Yes
Yes
Yes
No
Some
Intermodal competition
No
Yes
Yes
Yes
Yes
Yes
Intramodal competition
No
Yes
No
No
Yes
Yes
Price level
XXX
Decreased
Stable
Stable
Stable
Stable
Access charge
Low
Low
Low
Low
Low
Low
68
6.1.1 Market entry
Several researchers (see e.g. Kotler, 1988; Makadok, 1998; Pehrsson, 2004) have stated
the entry timing is important. Railway undertaking gaining the first mover advantage
after the liberalization in Sweden was the old monopoly undertaking, which was able to
continue the services like previously. However, interviewee saw situation positively;
“timing to be named XXX was excellent”. As a first mover, the railway undertaking was
able to build a strong brand.
All interviewed railway undertakings were established within ten years’ time period,
1994–2004. This is explained by the fact that in 1994 the old governmental
organization, Statens Järnvägar (SJ) decided to discontinue unprofitable short-lines and
gave an opportunity for new railway undertakings to take over the lines in question.
Figure 17 describes the background of the interviewed undertakings before entering the
railway freight market. Four railway undertakings have straight connection to SJ: one of
the case undertakings is the old SJ Freight, while three railway undertakings were startups starting to operate old SJ regional lines. In addition, one start-up entered the markets
as late entrant, having history in shipping. One railway undertaking entered the market
via vertical integration; before acquiring an old railway operator, it had a history in
railway maintenance.
17 %
17 %
Construction
SJ
Shipping
66 %
Figure 17
Background before entering railway freight market / Sweden
Because 66 per cent of interviewed railway undertakings had roots on railway market,
they were well aware of external and internal factors affecting on entry mode’s
selection. Therefore, the personnel had strong market experience, which Koch (2001)
noted as especially important factor.
69
15 %
Other interviewed railway
undertakings
Company F
85 %
Figure 18
Turnover / market leader versus other railway undertakings / Sweden
It is recognizably outstanding that one railway undertaking has monopoly position.
Figure 18 compares the leader’s turnover with other interviewed railway undertakings,
including five actors. Same trend is visible in the amount of personnel; market leader
has 87 per cent of whole market’s employees; other railway undertakings’ share is 13
per cent.
As stated in several studies (Alexandersson et al., 2000; Järnvägstyrelsen, 2007), in
addition to monopoly holder there are few bigger railway undertakings and dozen small
railway undertakings. This research’s finding supports the stated market structure.
Figure 19 presents the other railway undertakings’ turnover and amount of personnel
(excluding the market leader).
650
600
550
500
450
400
350
300
250
200
150
100
50
0
turnover / MSEK
personnel
A
Figure 19
B
C
D
E
Turnover and personnel / interviewed railway undertakings (excluding
market leader) / Sweden
70
Sampling represents 35.3 per cent of Swedish railway freight market’s railway
undertakings, and among the market leader there are one larger railway undertaking,
two medium-sized undertakings and two small railway undertakings.
Kotler (2000) notes companies can be classified into two types: competitor-oriented and
customer-centered. By overseeing customer needs, company can decide which
customers’ needs are the most important to serve with the possible resources and
objectives. (Kotler 2000, 247–249) Five of the interviewed railway undertakings
informed the reason to enter the markets was customers’ request; this presents 83 per
cent of all interviewed undertakings (see figure 20). Although, one railway undertaking
did not state directly the reason was the customer, interviewee noted: “customer is
always behind the market entry.”
17 %
Customer
Old SJ
83 %
Figure 20
Reason for market entry / Sweden
Table 14 assembles the railway undertakings’ strengths and weaknesses. Weaknesses
vary between big and small railway undertakings: interestingly, both stated the size is a
problem but due to different reasons. Financial background creates problems for small
railway undertakings: they cannot acquire many new locomotives. On the other hand,
big railway undertaking stated due to the size, market changes faster than they do.
71
Table 14
Railway undertakings’ strengths and weaknesses
STRENGTHS
WEAKNESSES
Strong brand
Undertaking's size
Modern, customer-oriented locomotive fleet
Possibility to invest in big investments
Strong customer focus
Age and size of organization
Experienced, well-educated and flexible personnel
Age of rolling stock
Skills, knowledge and history
Few customers; big risks
Internal network
Hard to offer door-to-door services
Flexibility; innovativeness
Cooperation
Strong financial background
Strong market situation
Most of the strengths are related to customer focus, flexibility, cooperation and
personnel. Because every railway undertaking was able to attract old SJ employees, they
had excellent knowledge of railway freight industry before entering the market. Three
undertakings started to operate old SJ regional lines, and railway undertakings acquired
the old employees. One railway undertaking acquired an operating railway company;
therefore personnel were well aware of railway market’s peculiarities. One railway
undertaking was established by old SJ / Green Cargo employee, and he gathered old
colleagues to join the company. When old SJ Freight converted into Green Cargo, all
employees became part of the new railway undertaking. However, according to
interviews, there are some differences between the undertakings. Few interviewees
stated governmentally owned SJ has lower retirement age than private railway
undertakings (60 vs. 65) and therefore engine drivers prefer working for governmentally
owned undertaking. One interviewee said their strength is a versatile locomotive fleet:
drivers are interested in joining the undertaking, because the fleet enables drivers to use
all of their skills. According to another interviewee, drivers are looking for open
vacancies in small railway undertakings, because they prefer working in a smaller work
community. All interviewees emphasized employees are their key asset; without
employees there are no transportation and therefore no business.
72
Table 15
Railway undertakings’ comments concerning drivers and personnel in
general / Sweden
DRIVERS
Does not have own drivers; rents drivers from
Green Cargo!
PERSONNEL IN GENERAL
Easy to attract well educated and motivated
workforce
Engine drivers are the most critical resource!
Old SJ drivers and new drivers create a good
mix
New undertaking employed old SJ personnel
Market is small; basically all employees have a
connection to SJ
Versatile locomotive fleet inspire drivers
No problems in hiring personnel
Small market, people know each other; mutual
background
Generality of employees are engine drivers
Liberalization has changed engine drivers’
tasks
Drivers educate themselves annually
Table 15 assembles the railway undertakings’ comments. Engine drivers are seen the
most critical resource; in small railway undertakings the generality of employees are
engine drivers. According to one interviewee, among ten employees are 6 engine
drivers, 2 office workers and 2 employees work at shunting yard. Liberalization has
changed engine drivers’ tasks. Many operators described there has happened a huge
change in work culture: “nowadays it is important that people have many skills, that
they have multi-functional knowledge. This way same person can do many tasks… This
increases the cost-efficiency.” According to interviewees, in addition to costeffectiveness various tasks increase the work-satisfaction.
According to Robertson et al. (2003), the main obstacle for new entrants is finance.
Macht & Robinson (2009) & Sørheim (2005) supported the study and concluded the
start-ups face considerable challenges in achieving long-term finance. Without a doubt,
the biggest financing object in railway is rolling stock. However, because four railway
undertakings started to operate in old SJ regional lines, they we able to acquire the
rolling stock from SJ. One company acquired old railway undertaking, including the
rolling stock; therefore, only one undertaking had to acquire rolling stock. The first
months railway undertaking rented locomotives from SJ; rather soon undertaking
acquired second hand locomotives.
However, lack of available financing reflects the used locomotive types. Although all
railway undertakings use diesel and electric locomotives, small undertakings own
relatively more diesel locomotives than larger undertakings (see table 16).
73
Table 16
Amount of locomotives per railway undertaking / Sweden
Diesel
4
5
24
4
4
150
Company A
Company B
Company C
Company D
Company E
Company F
Electric
15
2
6
2
25
250
Discrepancy can be explained; smaller railway undertakings do more shunting and
operate in narrower areas, which normally are not electrified. Naturally, if undertaking
needs only few locomotives, it is more reasonable to invest in diesel than electric
locomotives, due to their multi-functional range of usage. However, all undertakings
prefer using electric locomotives due to their higher traction power, higher speed and
environmentally friendly nature. All interviewees suggested a wish to have more
network electrified.
6.1.2 Market entry barriers
According to earlier studies (Brewer, 1996; Ludvigsen & Osland, 2009; Mortimer et al.,
2009; Mäkitalo, 2007; Steer Davies Gleave Sweden, 2003) the main barriers to entry are
exogenous barriers: acquiring the rolling stock and bureaucracy. However, there are
differences between countries. Brewer (1996) noted perceived level of access charges
was seen a barrier in UK; in Finland (Mäkitalo, 2007) and Sweden (Steer Davies Gleave
Sweden, 2003) researches estimated the difficulty of accessing the services creates a
great market entry barrier. Minor barriers to entry concluded long market entry phase,
recruiting staff and inadequate rail capacity. Mäkitalo (2007) noticed also endogenous
barriers are present in Finland: the actions of the market dominating railway
undertaking might complicate the entry process. The main findings concerning Sweden
are presented in figure 21.
6
5
4
3
2
1
0
Locomotives /
rolling stock
Figure 21
Investments
Rail capacity
Market entry barriers / Sweden
Bureaucracy
Finding
customer
Stations +
areas around
stations
74
Due to railway industry’s nature, investments are mainly locomotives and wagons.
Therefore, these two categories can be conjoined, stating all respondents thought this
compound as a barrier. Findings state clearly the main market entry barriers are
exogenous: bureaucracy and investments. Five from six interviewees stated bureaucracy
as a great market barrier; investments and locomotives / rolling stock were mentioned
seven times. Two railway undertakings named rail capacity as a problem; difficulties to
find a customer and stations / loading areas were mentioned once. Endogenous barriers
were not mentioned.
When comparing the results with earlier studies, both similarities as well discrepancies
are noted. Investments acquiring the rolling stock and bureaucracy are estimated high in
all studies. Especially bureaucracy unfolded several times in the Swedish interviews.
The main discrepancy is in accessing the services, which is stated as a barrier to entry in
previous studies (Mäkitalo, 2007; Steer Davies Gleave Sweden, 2003). Additionally,
Mäkitalo (2007) described recruiting personnel is a market barrier. According to this
research, engaging employees is easy.
6.1.3 Infrastructure
Railway transports’ market share continues to decline. According to recent study (SIKA
Institute, 2008), during 2002–2007 the decrease was ten per cent. Decline seems to
accelerate: volumes transported by railway declined four per cent during 2006 and
2007. Although railway has tried to raise its profile, intermodal competition8 continues
hard. Swedish railway undertakings confirmed the default information. Five
interviewees stated there is intermodal competition (see figure 22).
no
Intramodal
Intermodal
yes
0
Figure 22
1
2
3
4
5
6
Intermodal / Intramodal competition in Sweden
According to all interviewees, the main competitor is road transport. However, an
interviewee stated: “one driver in a train can have 50 containers behind him, in a truck
8
Intermodal competition = competition between transportation modes, for example railway vs. road,
railway vs. sea
75
only two.” Therefore railway is hard to beat by other modes. Railway is seen as costeffective and environmentally friendly transport mode offering quality services for big
and heavy products like containers. However, few interviewees noted railway should
enhance its market share also in transporting smaller quantities.
Although road transport is seen as major competitor for railway, few interviewees
mentioned short-sea transport as a competitor. Interviewees thought railway transport is
a competitive option for Sweden due to country’s length and the nature of main
industries (steel, metal, wood, timber, paper). However, in order to compete more
aggressively with road, railway should increase additional services. According to
Swedish experts, additional services could include better customer service, for example
in the form of track and trace –systems. Also time-to-market should be enhanced.
Trucks are able to organize pickup in few hours; organizing a railway transport takes
many days, due to rail capacity, rolling stock and bureaucracy.
Intramodal competition9 divides the opinion: half of the interviewed railway
undertakings thought there is competition, whereas 50 per cent did not see any
competition. The main explanation lies in niche operators; four railway undertakings
from six stated they are operating in a niche market. One interviewee commented:
“Competition should be between rubber wheel and steel wheel, not steel wheel and steel
wheel.” Therefore, they do not compete with other railway undertakings. In addition to
four nichers, the sampling includes one leader and one challenger. These strategies are
visible also in figure 23, which illustrates how the competition between five railway
undertakings is spread around Sweden. The market leader is not included in the map (it
operates country widely). Different colours present the main market areas; dark blue is
used for several railway undertakings due to their narrow lines. Map describes well the
situation: one nicher is located in North Sweden, were it has a dominant position in
transporting iron ore for one customer. Other nichers are blue lines in middle Sweden,
and red and green lines. Although the railway undertakings are working partly on the
same areas, due to differences in target market they do not feel there is competition.
Challenger is marked with black lines: it is actively operating in 2/3 of the country,
having also active network to Denmark, Norway and Germany.
9
Intramodal competition = competition in the same market, e.g. railway vs. railway
76
Figure 23
Interviewed railway undertakings’ market areas / Sweden (excluding the
incumbent)
The leader has transports countrywide; “One of the company’s biggest assets is our
network: we are able to deliver rolling stock to everywhere in Sweden.” Challenger
stated: “Although the customers are mainly located in middle-Sweden, we are ready to
transport whatever and where ever customers need!” Railway undertakings using niche
strategy are happy with the situation: “We are happy with the situation as it is now.
Naturally we keep our eyes open for new business opportunities. However, we do not
take customers only because we want to be bigger.”
Swedish railway undertakings were rather satisfied with infrastructure’s condition. Few
interviewees put forward a wish to increase the length of rail network and mainly the
number of tracks. The main corridors are double or triple tracked; however, normally
77
network has one track, which causes congestions. As one interviewee stated, “Trains
can not bypass the traffic jams like trucks”. Banverket noted the same matter: according
to the Infrastructure Manager, especially big cities are overloaded and it affects on rail
capacity. Remarkable bottlenecks occur nearby main harbors when ocean vessels
departure and arrive. Congestion affects most heavily on freight traffic; passenger traffic
has the inside track in a case of delays or problems on the network (Banverket, 2009).
Company’s performance on the market can be evaluated from the point of view of
industry. According to Porter (1980), industry structure determines the strategies
prospectively available to the undertaking. Especially forces outside the industry are
significant: because all undertakings of a certain industry are affected by the same
forces, the key question is to understand how different undertakings deal with them.
(Porter, 1980) Many researches (see Casaca & Marlow, 2007; Järnvägsstyrelsen, 2007;
Mäkitalo, 2007) have used Porter’s five forces in analyzing the transport markets.
According to interviewees, threat of new entrant is visible in Swedish railway freight
market. Various factors were mentioned: few interviewees stated they do capitalize on
economies of scale in terms of locomotives, switching costs were seen high and access
to network problematic. One interviewee noted the subsidies distract today’s fair
competition; more equal conditions were requested. Interviewees also stated proprietary
experience exists in the terms of know-how and rolling stock fleets’ competence.
Although intensity of rivalry exists in Swedish market on some extend, it is not seen as
a barrier to entry. Price competition and customer service were seen as the major
sectors; although railway undertakings try to innovate and introduce new products, in
railway market it is seen hard. Road transport is the main substitute: although some
short-sea traffic exists, it is not seen as respectable competitor.
Interviewees thought transport service buyers have high bargaining power. Due to
increasing competition, buyers race the railway undertakings which decrease the market
price. In addition, generally customers have good knowledge about the market. Due to
the nature of suppliers, there exists bargaining power. Interviewees stated rolling stock
needs to be bought in bigger quantities, for example ten locomotives at a time. Because
there are only few suppliers in the rolling stock market, companies have a chance to
affect the market situation.
6.1.4 The Swedish Rail Administration, Banverket
The Swedish Rail Administration, Banverket, is responsible for the rail network in
Sweden. Banverket’s main duties are to monitor and conduct developments in the
Swedish railway market and assist Parliament and Government in railway related
matters. They are responsible for the network’s operation and administration, and they
create the timetables for railway traffic. (Banverket, 2009) Therefore, the railway
undertakings have cooperation with Banverket. Figure 24 describes the operators’
satisfaction with Banverket.
78
4
3
2
1
0
bad
Figure 24
good
really good
Cooperation with Banverket
Swedish railway undertakings are really satisfied with Banverket. Three railway
undertakings stated cooperation is good; three said it is really good. In fact, one
interviewee noted: “Cooperation with Banverket is a perfect example of good
cooperation”. Especially railway undertakings were satisfied with Banverket’s style to
listen: according to few interviewees, Banverket asks railway undertakings’ opinions
and respects their requests. In addition, lower level workers’ positive attitude got good
feedback. According to interviewees, lower level personnel act professionally and
cooperation is easy and smooth. “Trust and personal connections are really important.”
However, there are also some areas, which could be improved. Interviewees stated
sometimes the cooperation with bigger managers is a bit difficult: “Big bosses think
railway undertakings only want to gain money; the field employees understand there is
also something else behind the reason to do railway operations.” In addition, few
railway undertakings stated every now and then Banverket has difficulties in defining
their client. Additionally railway undertakings stated the Infrastructure Manager’s new
employees should be trained more carefully before they start to cooperate with railway
undertakings; as one interviewee stated: “First we have to teach them how to work on
railway market.”
In addition to managing the infrastructure and scheduling the timetable, the
Infrastructure Manager publishes the Network Statement. It is published annually in
most of the European Union member countries in accordance with Directive
2001/14/EC (Banverket, 2009; Finnish Rail Administration, 2008). The main purpose of
the Network Statement is to provide all railway undertakings wishing to operate
transport services in a given railway infrastructure relevant and up-to-date information
on a fair and non-discriminatory basis. The document presents information on legal and
commercial access conditions and information on the networks’ infrastructure.
Members of RailNetEurope have agreed a common structure, and the aim is to
harmonize information provided in the Network Statement across Europe. Because the
Network Statement introduces the current legal conditions and timetables, it should be a
useful tool for railway undertakings. (RHK, 2008; RailNetEurope, 2009)
79
17 %
33 %
Not good
OK
Good
50 %
Figure 25
Swedish railway undertakings’ opinion about the Network Statement
Figures 25 and 26 present Swedish railway undertakings’ attitude towards the Network
Statement. According to interviewees, 33 per cent thinks the Network Statement is a
good and useful publication. 50 per cent of interviewed experts stated the Network
Statement is ok, and 17 per cent said it is not a good publication. Some railway
undertakings think the information is too general and does not provide service for the
mentioned purpose. However, also the respondents, who generally are satisfied with the
Network Statement stated there are few problems. One of the main problems is the
stability of the published information. Data is updated annually, which creates problems
in bidding procedures. Additionally, respondents stated it is impossible to know 15
months beforehand, when the deliveries should be done. “The procedure is too
bureaucratic!” Railway undertakings want to increase the timetable’s flexibility and
variability. Respondents also stated the Network Statement should be more informative,
it should include more maps, pictures and so on. One interviewee said: “We need tools,
not words!” Table 17 assembles the railway undertakings’ comments.
Table 17
Swedish railway undertakings’ comments concerning the Network
Statement; positive and negative matters
POSITIVE
NEGATIVE
Fulfills its purpose; gives
enough information
Requests must be stated 15 months beforehand; too long
planning process!
Good, helpful book
Stability of published information
Good publication
More precise information needed
Norwegian version more informative than Swedish one
80
Figure 26 presents how many of the interviewed railway undertakings use the Network
Statement. Only 33 per cent stated the Network Statement is actively used, while 67 per
cent do not utilize the publication. The reasons reflect previous questions’ line:
“Provided information is too general”. Railway undertakings think the Network
Statement should include information about the service facilities along the network
(sidings, terminals and loading areas). In addition, few interviewees noted a list of
companies operating in different areas (including railway undertakings, workshops,
terminals, warehouses etc.) would be useful.
33 %
Using
Not using
67 %
Figure 26
The Network Statement usage
The Swedish Rail Administration, Banverket, is also responsible for charging the usage
of infrastructure. Infrastructure charges are governed by Railway Act. In Sweden there
are two types of costs: marginal-cost-based charges and special charges. (Banverket,
2008) All six interviewees confirmed the infrastructure charge is low, and it is not a
barrier to entry.
81
Table 18
Change from monopolistic market to liberalized market / Sweden
Factor
Market force
Number of railway
undertakings
Barriers to entry
T
Monopoly
t+1
Deregulated
t+2
Free market
1
1
17
Huge
Large
Large
Market entry
Impossible
Start up*
Start-up, vertical integration
Price level
Normal
Decreasing
Service level
Normal
Infrastructure charge
Low
Normal
Getting
better
Low
Improving
Low
Table 18 illustrates the main changes what have happened in the Swedish market after
monopoly. T illustrates monopolistic situation (see figure 1), t + 1 deregulated market
and t + 2 liberalized market. When summarizing the changes, number of operators has
increased from one to 17. Barriers to entry are still large, but situation is obviously
better than it was before the market deregulation. After the deregulation, the main
market entry strategies utilized are start-up (although noting all start-up railway
undertakings were old SJ) and vertical integration. Price level has decreased, and
service level has improved. Infrastructure charge has stayed at the same level.
6.2
Poland
In Poland were interviewed altogether eight companies, seven railway undertakings and
the Polish Rail Administration, PKP PLK. Due to companies’ different nature, only
railway undertakings are included in the table below. PKP PLK’s results are discussed
separately. In addition to Polish companies, one Lithuanian company was interviewed
in order to create a view concerning the Lithuanian and Polish cooperation.
Table 19 represents the main findings from Poland. All thematic entities, divided into
groups according to theme interview’s model, are discussed more deeply later on in this
sub-chapter.
82
Table 19
Measure
Main results / Poland
Company G
Knowledge about
railway market
before entering
Excellent
Why company
entered railway
industry?
Company H
Company I
Company J
Company K
Company L
Company M
Excellent
Good
Excellent
Excellent
Excellent
Excellent
Need for
transport
Money
Size of the
market
offer
additional
services
Need for
transport
Opportunity
National
operator
Rolling stock where gathered
when started the
business?
Acquired
Coal mine
bought 2nd
hand
Bought 2nd
hand
Bought 2nd
hand
Acquired
PKP
Personnel's
background
Acquired
Coal mine
PKP / other
Acquired /
PKP / other
Refinery /
PKP
Acquired
PKP
Main market
barriers
Licensing &
admin
Competition
Rolling stock
Rolling stock
Rolling stock
Investments
Infrastructure
Investments
Bureaucracy
(mainly
Rolling stock
Bureaucracy
rolling stock
knowledge
locomotives)
Investments
capital
Problems and
difficulties faced
when entered the
markets
Positive matters
faced when
entered the
markets
Company's
strengths
Company's
weaknesses
infrastructure
cost
Only 1
wagon type
XXXX
Demand
XXXX
XXXX
knowledgeable
staff
Personnel
XXXX
Bureaucracy
Amount of
growth
Demand
No
XXX
Experience
Motivation Communication
Equity /
assets
Bureaucracy
XXX
rolling stock
Experience
Intl'
cooperation
Personnel
Reputation
Experience
IT-systems
Lack of
electric
Age of rolling
stock
access to
power
No national
coverage
Lack of
capital
processes
locomotives
Harbor
operations
cost of diesel
Lack of electric
XXXX
locomotives
Cooperation with
other operators?
Intermodal
competition
Intramodal
competition
Price level
Access charge
Some
No
Some
Some
Yes
No
Some
Yes
Yes
Yes
Yes
Yes
Yes
Yes
Really hard
Hard
Yes
Aggressive
Strong
Aggressive
Hard
Decreasing
Increased
XXXX
Decreasing
Decreasing
Decreasing
Decreasing
High
High
High
High
High
High
High
83
6.2.1 Market entry
Due to various circumstances (undertaking entered the market in 1997 concentrates on
construction; 1999 established railway undertaking worked four years as a listening
post) we can conclude all railway undertakings entered the markets within four years,
2001–2004. In addition, when examining only the private railway undertakings that
entered the markets after the liberalization, the year distribution narrows down to two
years, 2003 and 2004. Therefore, although one undertaking, earlier monopoly holder
has the first mover advantage, other interviewed railway undertakings have entered the
markets within the same timeframe.
Figure 27 describes the background of the interviewed railway undertakings. Dispersion
is extensive: in a group of seven interviewed railway undertakings, there are five
different types of backgrounds. Vertical integration is used by four undertakings, having
backgrounds from heavy industry and construction; one railway undertaking applied
horizontal integration (forwarding). Although, one undertaking was a new entrant on
Polish market, undertaking belongs to a bigger corporation and is therefore a subsidiary.
The seventh interviewed railway undertaking is the old governmentally owned operator.
14 %
14 %
14 %
New
National operator
Forwarding
Mining / refinery / chemical
Construction
44 %
Figure 27
14 %
Background before entering railway freight market / Poland
Although, only one railway undertaking has background in railway transport, other
counterparts have gained market knowledge via various ways. Therefore, all newcomers
were aware of railway market’s internal and external factors. For example, by acquiring
personnel during the vertical integration process from the parent company, railway
undertakings assembled knowledgeable employees.
Figure 28 shows remarkably that one railway undertaking has a monopoly position. As
stated in various studies, Polish railway freight market has one giant-sized player, three
larger private actors and numerous smaller railway undertakings. Figure compares the
leader’s amount of employees to other interviewed railway undertakings, including six
undertakings.
84
12 %
Other interviewed railway
undertakings
Company M
88 %
Figure 28
Personnel / market leader versus other interviewed railway undertakings /
Poland
Rest of the 49 active railway undertakings are more or less small actors. However, it
must be noted that because Poland is the second biggest railway freight market in
Europe, a small railway undertaking in Polish market might be a big player when
compared internationally. Sampling represents 14.3 per cent of Polish railway freight
market’s active railway undertakings; among the sampling are four biggest railway
undertakings and three smaller actors.
Kotler (2000) notes companies can be classified into two types: competitor-oriented and
customer-centered. By overseeing customer needs, company can decide, which
customers’ needs are the most important to serve with the possible resources and
objectives. (Kotler 2000, 247–249) As illustrated in figure 29, the reason to enter the
Polish railway market varies dramatically. Basically, three railway undertakings are
customer-oriented (transport need, additional services for customers), which states 42.9
per cent of interviewed railway undertakings. Two railway undertakings saw a market
opportunity due to market’s size; one needed financial backup. Naturally, one undertaking was the old national operator.
85
14 %
14 %
Money
Opportunity
29 %
Additional services
Need for transport
PKP
29 %
14 %
Figure 29
Reason for market entry / Poland
The railway undertakings’ strengths and weaknesses reflect the versatility of the market
(see table 20). As weaknesses railway undertakings’ stated several thematic entities; ITsystems and processes were lacking behind and number of electric locomotives was not
sufficient. Additionally, access to electric power and fuel were mentioned as
weaknesses –although those can be categorized also as threats. Also engine drivers’
locations were seen a weakness: although undertaking would have a possibility to
practice railway traffic in whole country, the lack of drivers in various places impedes
the situation.
Strengths continued the same trend: various topics were mentioned. Transport quality,
communication with customers and reliable reputation state railway undertakings are
focusing on customer service. Several railway undertakings noted experienced and
knowledgeable staff is among their main strengths.
86
Table 20
Polish railway undertakings’ strengths and weaknesses
STRENGTHS
WEAKNESSES
Equity / assets
Lack of capital
Experience; knowledgeable staff
IT-systems and processes
Motivation
Number of electric locomotives
Streamline management
Not access to fuel in several places
Rolling stock
Access to electric power
Drivers not located throughout the
country
Reliable reputation
Communication with customers and internally
High-level of technological competence
Transport quality
International experience
Diversified transport possibilities
Because most of the personnel had background from PKP, all railway undertakings
have good knowledge of the market (see table 21). Generally, attracting employees is
easy, although there is only little movement inside the market. According to
interviewee, the two main groups of employees are the maintenance people working in
workshops and the engine drivers. Although PKP is reluctant to give up any of its
drivers, railway undertakings stated it is easy to find engine drivers. Due to European
Union legislation, there are strict rules and requirements, which drivers need to fulfill in
order to act as a driver. Therefore, undertakings have own training programs, which
educate the future engine drivers. For example, one railway undertaking described their
program trains driving assistants, who after some experience can move on to engine
drivers. A versatile mix of old and new engine drivers is an objective undertakings want
to achieve. Interestingly, one interviewee stated engine drivers study languages, in order
to operate in the international market.
87
Table 21
Railway undertakings’ comments concerning drivers and personnel in
general / Poland
ENGINE DRIVERS
PERSONNEL IN GENERAL
Drivers need to study languages
High knowledge level
Undertakings have own training programs
Only little movement inside the market
PKP is reluctant to give up any of its drivers
Easy to find engine drivers
Quite often background from PKP
Big flow of employees from PKP to
private railway undertakings
Strict rules and requirements
Easy to find personnel
According to Robertson et al. (2003), the main obstacle for new entrants is finance.
Without doubt, the biggest financing object in railway is rolling stock. In Poland
railway undertakings gathered rolling stock by various means: vertically integrated
railway undertakings acquired the rolling stock from parent company. However, railway
market in Poland faced a critical situation, because the national operator did not sell the
old locomotives to new entrants, although many of them were unused. Due to this
national peculiarity, railway undertakings had to buy rolling stock from abroad,
countries like Czech Republic, Romania and Germany. In order to fulfill the requisite
standards, all units acquired abroad had to pass remarkable maintenance work, which
naturally cost exceedingly. As one interviewee stated, “We had to invest eight to ten
million dollars only for repair work!” Understandably, this affects on railway
undertakings’ possibilities to acquire various types of locomotives. Additionally, there
were more diesel locomotives available for cheaper price.
Table 22
Company G
Company H
Company I
Company J
Company K
Company L
Company M
Locomotives types per railway undertaking / Poland
diesel
79
36
6
94
35
18
1849
electric
32
0
0
102
35
2
1653
Because diesel locomotives are cost-effective due to multi-functional nature and able to
drive on whole network, several railway undertakings own more diesel locomotives (see
table 22). However, after undertakings have been operating for a while, they increase
the locomotive fleet by buying electric locomotives. Some interviewees stated they are
checking different opportunities and planning to buy electric locomotives.
88
6.2.2 Market entry barriers
According to earlier studies (Brewer, 1996; Ludvigsen & Osland, 2009; Mortimer et al.,
2009; Mäkitalo, 2007; Steer Davies Gleave Poland, 2003) the main barriers to entry are
exogenous barriers: acquiring the rolling stock and bureaucracy. However, there are
differences between countries. Brewer (1996) noted perceived level of access charges
was also seen a barrier in UK; in Finland (Mäkitalo, 2007) and Sweden (Steer Davies
Gleave Sweden, 2003) researches estimated the difficulty of accessing the services
creates a great market entry barrier. Minor barriers to entry concluded long market entry
phase, recruiting staff and inadequate rail capacity. Mäkitalo (2007) noticed endogenous
barriers are present in Finland: the actions of the market dominating railway
undertaking might complicate the entry process. Figure 30 presents the findings from
Poland.
6
5
4
3
2
1
0
Locomotives /
rolling stock
Figure 30
Investments
Rail capacity
Bureaucracy
Knowledge
Competition
Market entry barriers / Poland
Due to railway industry’s nature, investments are mainly locomotives and wagons.
Result states in Poland the main market entry barrier is needed investments: nine
railway undertakings named rolling stock or investments as the main barrier to entry.
Three railway undertakings thought investments / rolling stock is the only barrier, four
railway undertakings specified also other barriers. According to three railway
undertakings, bureaucracy is an entry barrier. Rail capacity, market knowledge and
competition with the market leader were mentioned once.
When comparing the results with earlier studies, we can notice similarities and
discrepancies. Investments acquiring the rolling stock and bureaucracy are estimated
high in all studies. Endogenous barrier, namely actions of the market dominant
undertaking, is stated as a barrier to entry in Poland. This is in line with Mäkitalo’s
research (2007). Additionally, Mäkitalo (2007) described recruiting personnel is a
market barrier. According to this research, engaging employees is easy.
89
6.2.3 Infrastructure
Intermodal competition continues really hard in Poland. All interviewed railway
undertakings stated there is intermodal competition (see figure 31). According to
interviewees, Poland’s location in main Europe enables only road transport as a
respectable competitor. According to interviewee: “Sea transport has collapsed; it has
faced really noticeable decline….. Only actual competitor to railway is road.”
no
Intramodal
Intermodal
yes
0
Figure 31
1
2
3
4
5
6
7
8
Intermodal / intramodal competition in Poland
Same trend continued in intramodal competition. All interviewed railway undertakings
highlighted the competition between railway undertakings is really hard. Words
aggressive, really strong and hard were used frequently. However, term “positive” and
respect were used: “Private operators are aggressive on the markets – in a positive
way”; according to another interviewee: “Really aggressive competition, although
railway undertakings do respect each other.” This is explained by the fact practically
all railway undertakings operate countrywide: among the interviewed railway
undertakings were only two niche operators. In addition to leader and two nichers, we
can identify three challengers and one follower. Therefore, we can state Polish market
has really strong competition. This is visible also in figure 32. One exception exists:
PKP LHS (PKP Linia Hutnicza Szerokotorowa spółka z o.o. w Zamościu) is the only
railway undertaking in Poland practicing railway transport using the wide gauge. The
network covers around 400 km from the Polish – Ukrainian border in Hrubieszów, and
ends in Sławków. (PKP LHS, 2009)
90
Figure 32
Railway undertakings’ market areas / Poland
Polish railway undertakings stated their dissatisfaction for the rail network’s condition.
Interviewees commented the Polish Rail Administration, PKP PLK, repairs the rail
network; however due to network’s length, the assets are used to maintain the main
passenger corridors. Because freight is transported throughout the country, some parts
are in really bad condition. All interviewees stated Polish rail network is in bad
condition. This affects directly on the commercial speed. Correlation between
infrastructure charge, transported goods and commercial speed is presented in figure 33.
91
130 %
120 %
110 %
infrastructure charge
100 %
90 %
transported goods
80 %
average commercial
speed
70 %
60 %
50 %
40 %
2004
Figure 33
2005
2006
2007
2008*
2009*
Correlation between variables (*estimation) (CTL Logistics, 2009)
In 2005 and 2006 the direction was mainly positive. Amount of transported goods was
increasing, while infrastructure charge decreased. Average commercial speed was
decreasing, partly due to increased number of transportation. In 2007 the situation
changed dramatically. Because year 2006 had positive figures, the Polish government
decreased the amount of governmental support for PKP PLK. The Infrastructure
Manager had to increase the infrastructure charge in order to gather needed amount of
money for infrastructure maintenance. Due to increased infrastructure charge, volume of
transported goods started to decrease. At the same time average commercial speed
continued declining, partly due to infrastructure’s bad condition. Since 2007 the market
situation has been really bad. Infrastructure charge is increasing annually, while volume
of transported good decreases. Average commercial speed is also declining. According
to interviewees: “The average commercial speed is around 20–30 km / h; in Germany
operators are fined if the speed goes under 50 km / h!”
The average commercial speed affects directly on transportation costs. One interviewee
gave a good example; “If a block train with one locomotive + 30 wagons runs more
than 400 km in 30 km / h, the transportation cost is 28 PLN / ton. If speed decreases to
20 km /h, cost increases to 30.88 PLN, which is 10.3 per cent increase. In other words,
undertaking needs to increase the number of rolling stock with seven locomotives and
161 wagons!” Therefore, the condition of infrastructure is really important matter in
railway transport.
Company’s performance on the market can be evaluated from the point of view of
industry. According to Porter (1980), industry structure determines the strategies
prospectively available to the undertaking. Especially forces outside the industry are
significant: because all operators of a certain industry are affected by the same forces,
the key question is to understand how different undertakings deal with them. (Porter,
1980) Many researches (see Casaca & Marlow, 2007; Järnvägsstyrelsen, 2007;
Mäkitalo, 2007) have used Porter’s five forces when analyzing the transport markets.
According to interviewees, threat of new entrant is strong in Polish railway freight
market. Various factors were mentioned: several interviewees stated they do capitalize
92
on economies of scale in terms of rolling stock, switching costs were seen high and
access to network problematic. All interviewees noted capital requirements are
enormous. Because transport contracts are capital intensive, railway undertakings prefer
to do long-term contracts affecting on switching costs. Interviewees also stated
proprietary experience exists in the terms of know-how. In addition, one railway
undertaking stated brand plays a big role in their strategy; few undertakings mentioned
they have done some advertising. However, as the best way of advertising was seen
word of mouth.
Intensity of rivalry is really hard and aggressive in Poland. Price competition was
described as “cruel and insane”. Due to large extent of competition, some railway
undertakings offer really low prices which damages whole market. Therefore transport
service buyers have bargaining power. According to interviewees, basically the main
and only substitute for railway transport is road. Poland’s location does not favor sea
transport; especially now when legislations and needed certificates are getting
harmonized, it’s more time-efficient for customers to use railway instead of short-sea
transport for example from Rotterdam or Antwerp.
Due to the nature of suppliers, there exists bargaining power. Interviewees stated rolling
stock needs to be bought in bigger quantities, for example ten locomotives at a time.
Because there are only few suppliers in rolling stock market, railway undertakings have
a chance to affect the market situation. The matter has a large influence in Poland, due
to difficult availability of second-hand rolling stock.
6.2.4 The Polish Rail Administration, PKP PLK
The Polish Rail Administration, PKP PLK S.A., is responsible for the national rail
network. The main responsibilities include network management, constructing
timetables, granting rail capacity and repairing the network. As Infrastructure Managers
in many other European countries, PKP PLK is responsible for publishing the Network
Statement. It has been published since 2004 and according to Railway act of 28 March
2003, it is published annually. (PKP PLK, 2008) The Network Statement’s aim is to
provide all railway undertakings wishing to operate transport services in a given railway
infrastructure relevant and up-to-date information on a fair and non-discriminatory
basis. The document presents information on legal and commercial access conditions
and information on the networks’ infrastructure. Members of RailNetEurope have
agreed a common structure, and the aim is to harmonize information provided in the
Network Statement across Europe. Because the Network Statement introduces the
current legal conditions and timetables, it should be a useful tool for railway
undertakings. (Finnish Rail Administration, 2008; PKP PLK, 2009; RailNetEurope,
2009)
Railway undertakings have to work in close cooperation with PKP PLK. Figure 34
describes interviewed railway undertakings’ satisfaction level with PKP PLK’s service.
93
6
5
4
3
2
1
0
bad
Figure 34
good
really good
Cooperation with PKP PLK
All interviewed railway undertakings stated cooperation with PKP PLK is either good
or really good. According to one interviewee, “This is a good example of good business
relations”. Two interviewees described PKP PLK provides good service for railway
undertakings; in addition, two undertakings mentioned PKP PLK treats all railway
undertakings the same way, which is really important in the tough market. Few
interviewees described the personnel have close relationship to PKP PLK’s employees
due to common history in the old PKP; this naturally helps the situation. Quoting one
interviewee, “Conversations and negotiations can be done on a frank basis”. Trust is
seen as an important feature in Polish market. However, there is some dissatisfaction.
Few interviewees proclaimed concern about the fact PKP PLK is part of PKP Group.
They state this produces conflict of interests. They suggested PKP PLK should be
restructured away from PKP group. One interviewee stated they have problems in
getting rail capacity for ad hoc trains: the decision making can take up to 72 hours, or
even more. “If customer demands transportation tonight, they cannot wait for 72
hours”. Therefore PKP PLK should enhance the decision making process. Figures 35
and 36 describe Polish railway undertakings thoughts about the Network Statement.
94
29 %
42 %
Not aware
Not good
OK
0%
Good
29 %
Figure 35
Polish railway undertakings’ opinion about the Network Statement
According to interviewees, 42 per cent thinks the Network Statement is a good and
useful publication. 29 per cent of interviewed experts stated the Network Statement is
ok; no one thought it is not a good publication. However, two railway undertaking
representatives were not sure, if Poland has the Network Statement. Reason might stand
in interviewed level: although railway undertakings’ operation departments would use
the publication, prospectively manager level is not aware of it. Same trend is seen in
figure 36, which illustrates the usage of the Network Statement.
29 %
Using
Not using
Not aware
0%
71 %
Figure 36
The Network Statement usage / Poland
All interviewed railway undertakings that were aware of the Network Statement, are
using it regularly. It was seen a good and useful publication. However, some
dissatisfaction was expressed. “How can we create Business Plans connected with
buying modern railway stock and show banks, which could finance it, documents that
would meet their requirements, if the game rules on the railway market can change
95
from year to year? Stability of legal solutions, knowledge of rules and infrastructure
charges in a long term is one of the main conditions for taking investment decisions by
carriers.”
However, worth mentioning is, when railway undertakings were asked about the
Network Statement, most could not recognize the publication. After re-checking, the
above data was collected. Naturally, the reason might lie in the level of interviewed
persons: top managers do not need to be aware of all publications used in operating
level.
The Polish Rail Administration, PKP PLK, is the authority who charges from using the
infrastructure. The costs are prescribed in Railway Act of 28th March 2003 on railway
transport and degree of Minister of Transport of 30 May 2006 on conditions concerning
access and use of railway infrastructure (last amendment has been done 18th August
2008). Both of these were issued according to Directive 2001/14. (PKP PLK, 2009) The
infrastructure charge chart is basically a triangle (see figure 37).
PLK
Budget
Figure 37
Operator
Infrastructure charge triangle (CTL Logistics, 2009)
The national budget allocates annually money to PKP PLK for repairing and
maintaining the infrastructure. PKP PLK defines annually the infrastructure charge
railway undertakings need to pay in order to use the network. There is a direct
correlation between the infrastructure charge and amount received from government: if
national budget gives a lot of money to PLK, the infrastructure charge is lower.
Correspondingly, if the budget gives less money, the price railway undertakings’ have
to pay increase and railway undertakings are less competitive. If infrastructure charge is
high, transported volumes decrease and government receives less money. Due to
decrease in charges collected, there is a tendency to increase the infrastructure charge.
Therefore the triangle creates a never-ending circle.
In addition to infrastructure charge, PKP PLK charges additional costs, namely: 1)
access to refueling facilities, 2) access to freight terminals, 3) access and use of
marshalling yards, 4) access and use of tracks and facilities for train sets formation, 5)
use of storage sidings, and 6) monitoring of dangerous goods transport. (PKP PLK,
2009) All interviewed railway undertakings stated infrastructure charge is really high. It
is the second highest in the whole Europe, after Slovakia. Interviewees explained the
charge is 30–35 per cent from total costs and it is increasing annually. Although,
railway undertakings stated sharply it should be lower, one interviewee commented:
“As long as it is charged in non-discriminately way, all railway undertakings are
competing on the same basis”.
96
Table 23
Change from monopolistic market to liberalized market / Poland
Factor
t
t+1
t+2
Monopoly
Deregulated
Free market
1
1
Over 90
Huge
Impossible
Large
Vertical
integration
Large
Start-up, vertical integration,
subsidiary
Price level
Normal
Normal
Decreasing
Service level
Normal
Getting better
Improving
High
Higher
Even higher
Market force
Number of railway
undertakings
Barriers to entry
Market entry
Infrastructure charge
Table 23 illustrates the change of market from monopolistic competition to liberalized
market. As table describes, the number of railway undertakings has increased
dramatically. Today Polish market has over 90 railway undertakings (49 are active).
Barriers to entry still exist. Market entry has developed from the beginning. 2003 when
first private railway undertakings entered the markets, the mainly used market entry
strategy was vertical integration. Today, railway undertakings are using start-up,
vertical integration and subsidiaries. Price level is decreasing and service level is getting
better. Infrastructure charge is increasing annually.
97
7
RESEARCH RESULTS – COMPARISON BETWEEN SWEDEN AND
POLAND
Chapters 6.1 and 6.2 introduced the situation on the Swedish and Polish markets. This
chapter concludes the findings and discusses the outcomes.
7.1
Market entry
Polish and Swedish railway freight markets are different, partly because liberalization
process was done during different decades. Sweden started the liberalization process in
1988 and Poland in 2000; first private railway undertakings entered the markets in
Sweden 1990, although the access to whole network was granted only in 1996.
(Alexandersson & Hulten, 2005) Polish railway freight market faced the first private
entrant in 2003 (PKP PLK, 2009). However, due to national peculiarities, like the type
of main industries, we can assume the situation would have been the same although
countries would have done the process concurrently. The interviewees have entered the
markets in early stage; vertical integration and start-ups are the main market entry
strategies used. Strong interest towards liberalized market can be seen in both countries.
Figure 38 introduces the railway undertakings’ backgrounds before entering the railway
freight market.
5
4
3
Sweden
Poland
2
1
0
New
Figure 38
National operator
Forwarding /
shipping
Mining / refinery /
chemical
Construction
Backgrounds of the interviewed railway undertakings
The difference between Sweden and Poland is clearly visible. In Sweden the mostly
used market entry strategy was start-up, whereas Polish railway undertakings employed
vertical integration. In Sweden most of the private railway undertakings started as novel
railway undertakings from old SJ; in Poland the main background before entering
railway freight market was in heavy industry, mining / refinery / chemical. Other backgrounds present a minor role. This states the great difference between the case
countries: in Poland the governmentally owned enterprise did not privatize and enable
market possibilities for new railway undertakings. In Sweden SJ decided to open
business opportunities for new start-ups in the areas, which were unprofitable for SJ. At
the same time, situation describes the countries’ industrialization: in Sweden, likewise
98
in Finland, the main industries include pulp, timber, paper and steel, which transport are
outsourced for railway undertakings.
In Poland the main industry sectors are mining, including iron and coal, and steel
products. Due to market’s size volumes are really high, which enabled companies to
establish own railway undertakings. This reinforced the relationship between the
railway undertaking and customer. Therefore, we can state the customer-driven model is
starting to increase its market share in Eastern Europe. However, the difference between
western and eastern country is still visible: when entering the markets, customercentered strategy was used by 42.8 per cent Polish operators, compared to Swedish 83.3
per cent. Although, customer service and customer-orientation is starting to grow in
Eastern Europe, it still has a long way to the western European level.
In both countries the old monopolistic undertaking has the major market share. In
Sweden, Green Cargo leads the way with 75 per cent, PKP Cargo in Poland is the
number one with 78 per cent. However, due to market situation and the hard
competition, both markets are changing. Especially in Poland the competition is
becoming harder, and governmentally owned undertaking loses market share to smaller
railway undertakings. In Sweden the same situation is visible in smaller scale. The
sampling presents a good cross-section of the railway freight market: from both
countries the leader, challengers and nichers were interviewed. Therefore, we can say
this research’s sampling is congruent and extensive in both countries.
All railway undertakings in both countries have excellent or good market knowledge.
This is ascertained by employing the skillful and experienced staff. All interviewees
described the personnel have long history in railway transport, either from other railway
undertakings, mainly the old monopolistic enterprises, or from vertically integrated
industries. All interviewees emphasized the personnel is the key asset and the reason for
railway undertakings’ success.
Rolling stock acquisition differs between countries involved. Starting phase is identical,
since all new entrants start with second hand locomotives. The situation is harder in
Poland, where the governmentally owned undertaking do not sell additional
locomotives to private undertakings. Polish railway undertakings need to acquire all
rolling stock from abroad, which creates extra costs.
7.2
Market entry barriers
According to earlier studies (Brewer, 1996; Ludvigsen & Osland, 2009; Mortimer et al.,
2009; Mäkitalo, 2007; Steer Davies Gleave Sweden, 2003), the main barriers to entry
are exogenous barriers: acquiring the rolling stock and bureaucracy. However, there are
differences between countries. Brewer (1996) noted perceived level of access charges
was also seen a barrier in UK; in Finland (Mäkitalo, 2007) and Sweden (Steer Davies
Gleave Sweden, 2003) researches estimated the difficulty of accessing the services
creates a great market entry barrier. Minor barriers to entry concluded long market entry
phase, recruiting staff and inadequate rail capacity. Mäkitalo (2007) noticed also
endogenous barriers are present in Finland: the actions of the market dominating
railway undertaking might complicate the entry process.
99
Competition
Knowledge
Stations + areas around stations
Finding customer
Poland
Sweden
Bureaucracy
Rail capacity
Investments
Locomotives / rolling stock
0
Figure 39
1
2
3
4
5
6
Market entry barriers in Sweden and Poland
Figure 39 gathers the market entry barriers faced by the railway undertakings in Sweden
and in Poland. Exogenous barriers, acquiring rolling stock and bureaucracy, are seen as
major barriers to entry. Therefore, the outcome is in line with earlier studies. However,
countries involved have some special characteristics. The Swedish railway undertakings
stated respectively bureaucracy, rolling stock and investments. In Poland railway
undertakings stated same three topics but in different order: rolling stock acquisition
was seen as a major entry barrier, following by investments and bureaucracy. In both
countries bureaucracy associates to needed paper work: great number of needed
documents and certificates surprises. Title “bureaucracy” includes also the entry
process, which was seen long and exhausting. Although, persons had decades
experience on the market, process was seen impossible without help from consultants
and experts. The fact Swedish railway undertakings saw bureaucracy as a bigger
problem than Polish counterparts might be courtesy of the western business style: in
western countries people are not used to have lots of paper work; in eastern parts
countless need of documents, stamps and signatures are ordinary. This might conclude
the fact Polish railway undertakings saw bureaucracy only as third biggest barrier, after
rolling stock and investments.
Because the main investments in railway market are locomotives and wagons,
investments and rolling stock can be seen partly united entry barrier. Few operators
stated terminals and loading areas as investments; however, the majority of the
interviewees saw rolling stock as the main investment. The main reason why rolling
stock was seen an entry barrier lies in availability of rolling stock and the price of
locomotives and wagons. Although, wagons are not expensive when bought
individually, generally railway undertakings need to buy bigger fleets at once which
increase the needed investments. Locomotives are extremely expensive, the price of a
new locomotive is around three to five million Euros, depending on the locomotive’s
characteristics. Normally new railway undertakings do not have needed amount of
money to buy new locomotives; therefore railway undertakings prefer second hand
locomotives. Although, the governmentally owned railway undertaking in Sweden has
sold old locomotives to private undertakings, in order to satisfy the demand railway
undertakings have bought second hand locomotives from countries like Germany,
100
Austria and Denmark. Polish railway undertakings have acquired locomotives from
Romania, Czech Republic and even from Morocco. The need for foreign locomotives is
greater in Poland, arising from the fact the governmentally owned undertaking do not
sell its old locomotives to private railway undertakings, although there are hundreds of
locomotives unused. This might explain why rolling stock and especially locomotives
were seen as major entry barriers in Poland.
Other entry barriers represent a minor role in studied countries. Rail capacity and need
for sidings / terminals is mentioned both in this and Mäkitalo’s research (2007).
However, some discrepancies are visible. In this study railway undertakings did not
mention long market entry phase as a barrier, although it came up in few conversations.
Competition with the market dominating undertaking was stated only once, therefore it
can not be seen as a serious barrier. The main discrepancy lies in staff recruitment: this
research’s outcome states there are no difficulties to recruit staff. In actuality, several
interviewees noted there is well educated and experienced staff available. It seems some
employees prefer working in smaller railway undertakings, where people know
colleagues and work is more relationship-based. Many interviewees stated an adequate
mixture of old and new staff is an ideal situation: this ensures the know-how is
transferred to new generation, together with the latest knowledge.
101
7.3
Infrastructure
According to several references, railway market has faced losses during the last
decades. The main shift has happened from railway to road transport. Although,
European Union purifies railway’s reputation from being dirty transport mode used only
in heavy and bulk industries, railway undertakings still have a long path ahead in order
to increase the volumes up to the levels in 1950s. However, railway is seen as a
respectable competitor for other transport modes, namely road, air and sea. Due to the
nature of goods transported via air, the main competitors are road and sea. The same
outcome was found also from the studied countries.
8
7
6
5
Sweden
4
Poland
3
2
1
0
Intermodal
Figure 40
Intramodal
Intermodal / intramodal competition in Sweden and Poland
Figure 40 presents the interviewees’ opinion towards intermodal and intramodal
competition. Both competition branches face harder times in Poland: all interviewees
stated there is competition with other modes of transport. In Sweden 83.3 per cent of
interviewees thought there is intermodal competition. Sea transport was noted as a
competitor only in Sweden.
Intramodal competition, the competition inside the market, was seen extremely hard in
Poland. All interviewees commented competition as aggressive and really hard. In
Sweden the situation was distinctly different. Only 50 per cent of interviewees stated
there is competition. Same uniformity was seen in figures 23 & 32, presenting railway
undertakings’ operational areas. The difference in strategic groups partly explains the
old-boy network, which is a norm in the Swedish market. In Poland the market situation
is different. This is illustrated in figure 41.
102
5
4
3
Sweden
Poland
2
1
0
No
Figure 41
Some
Yes
Close
Cooperation between railway undertakings in Sweden and Poland
In Sweden only one railway undertaking stated there is no cooperation between railway
undertakings. Two described there is some cooperation; three described cooperation is
close and friendship-like. Railway undertakings cooperate on daily basis; they help each
other when problems occur and rent rolling stock to each other. Partly this is due to the
history and introspectiveness of railway industry: most of the people working on
railway market have common history from SJ or Green Cargo. Trust and personal
relationships are seen important: by combining the forces railway can compete against
road transport. The situation differs in Poland. Railway undertakings mainly have some
or no cooperation, railway undertakings prefer to act unaccompanied. Competition’s
aggressiveness describes the situation.
Reason might stand in time. Markets were liberalized in Sweden over ten years ago;
Polish market followed only five, six years ago. In Sweden the market has stabilized;
railway undertakings have realized in order to increase the total volume of railway
transport, they need to combine forces and act as a congruent front against other
transport modes. However, due to Polish market’s disagreement and hostility, a lot has
to happen, before Poland will get to the same level.
103
5
4
3
Sweden
Poland
2
1
0
Good
Figure 42
Ok
Bad
Really bad
Railway undertakings’ opinion about the infrastructure in Sweden and
Poland
A great difference is seen in infrastructure’s condition. Figure 42 presents the findings.
This study supports the earlier findings and the theory. Polish interviewees noted the rail
network is in bad or really bad condition. Status differs in Sweden: all railway
undertakings commented rail network is either in good or OK condition. This can be
explained by the length of network and available amount of money in repairing it.
7.4
The Rail Administration
The European Union legislation (Council Directive 91/440/EEC of 29 July 1991),
prescribed the management of infrastructure and operations need to be separated.
Therefore, PKP PLK was established in Poland and Banverket in Sweden. Infrastructure
Managers’ main responsibilities include network’s management, constructing
timetables, granting rail capacity and repairing the network. In addition, Infrastructure
Managers are responsible for publishing the Network Statement. (Banverket, 2009; PKP
PLK, 2009) Under these circumstances, railway undertakings need to work in close
cooperation with Infrastructure Managers. Figure 43 presents the nature of cooperation.
104
6
5
4
Sweden
3
Poland
2
1
0
Bad
Figure 43
Good
Really good
Railway undertakings’ satisfaction level / Infrastructure Manager
As illustrated in figure 43, all railway undertakings in sampling are really satisfied with
Infrastructure Managers’ work. Cooperation is described good or really good.
Infrastructure Managers treat all railway undertakings equally and thereby have attained
railway undertakings’ respect. However, one of the main publications published does
not acquire as good results. Figure 44 visualizes the outcome.
6
5
4
Sweden
3
Poland
2
1
0
Using
Figure 44
Not Using
Not aware
The Network Statement utilization
After Polish railway undertakings understood what was meant with the Network
Statement, 71 per cent confirmed the publication is used. On the contrary, in Sweden 67
per cent stated they do not use the publication. According to interviewed railway
undertakings, the information is too general; more tools are needed instead of words!
105
8
CONCLUSION
8.1
Summary and main findings
This study has provided insights into the railway freight markets’ situation after the
deregulation process in two countries, Sweden and Poland. The main purpose of the
study was to research the main barriers to entry and market entry strategies utilized by
the new entrants. In addition, research’s function was to conclude recommendations for
Infrastructure Manager in order to improve its service towards new potential entrants of
freight market. The main barriers to entry were identified and market entry strategies
used were discussed. Results were approached on country basis, followed by a
comparison between countries concerned.
In accordance with the European Directive, Finland deregulated the railway freight
market on 1st January 2007. Albeit the liberalization, new railway undertakings have not
entered the market. However, few railway undertakings have nibbled at potential market
entry. Several studies have been conducted of the Finnish railway market, pioneering
authors like Järvelä and Mäkitalo. Although this study does not approach the Finnish
railway market, it provides insights into two European Union railway markets, Sweden
and Poland.
Study’s empirical data was gathered by semi-structured theme-interviews. Research was
qualitative case study analysis, concentrating on descriptive analytical approach with a
tone of normative research. The qualitative method was employed because the data
needed for answering the research questions were qualitative by nature. In addition,
when researching novel topics, qualitative case analysis is a recommend way to gather
information (Eisenhardt, 1989). Altogether 18 interviews were done, seven in Sweden,
nine in Poland and two in Finland. The test-interview was organized with a possible
new entrant in Finland; another Finnish company was included in order to understand
the market situation. The sample gathered from case countries consisted of 14 relevant
railway undertakings, two railway Infrastructure Managers and one start-up
warehousing company.
Although topic is rather young field of research, it has grabbed researchers’ interest
world widely. However, previous literature exposed some gaps in the knowledge
concerning the construct of the research. Particularly important was to compare the
eastern and western European railway freight market peculiarities. Additionally,
previous studies have mainly focused on second-hand data and literature analyses.
Therefore first-hand data gathered via interviews can be seen as attenuating the existing
empirical gap.
Various reasons affect on the market entry process. Country’s national peculiarities, in
connection with the types of main industries, history, working culture and location have
an outstanding influence on the process. In Sweden, which presents in this study a
Western European country, the main market entry strategy utilized was start-up. The
Swedish National Railway undertaking noted some short-lines were unprofitable;
therefore after the deregulation process, railway undertaking decided to discharge some
of these lines. This enabled undertakings’ old employees to establish own, new railway
106
undertakings. However, in Poland the situation was remarkable different. Poland,
representing the Eastern European country, the novel railway undertakings were mainly
utilizing the strategy of vertical integration. Poland is a producer of heavy industry
products like coal and iron, which are mainly transported by railway. Since market was
liberalized, many mining companies decided to establish an own transport company.
Main reason might stand at European Union legislation: according to second Railway
Package, only a company which main business is railway transport can operate as a
railway undertaking. Therefore, this research states the mainly used market entry
strategies were start-ups and vertical integration, differing between case countries.
Worth mentioning is the national peculiarities’, such as industrializations’, proportion.
Several previous studies have concluded that market entry barriers do exist in railway
market. This study confirms the argument; research results state market entry barriers
do exist in Sweden and Poland. However, the results have some divergence. In Sweden
the exogenous barriers, bureaucracy and acquiring rolling stock were noted as major
barriers. In addition, needed investments were seen as the third largest barrier to entry.
However, because respondents stated the main investments in railway market are
locomotives and wagons, research suggests they should be treated as an aggregate. In
Sweden concern towards availability of loading areas, finding the customer and rail
capacity were noted as minor barriers to entry. Concerning the major barriers, Polish
results are congruent with Swedish: although in different order, as the main barriers to
entry were listed acquiring rolling stock, needed investments and bureaucracy. In this
context bureaucracy associates to all needed paper work, including numerous
certificates and licenses. The reason why bureaucracy is experienced as a larger barrier
in Sweden might have routs in countries’ location and governmental history: in Sweden,
likewise in other Western European countries, people are not adjusted to certificates,
stamps and long procedures. However, in Eastern Europe this is commonplace. This
might explain the gradation between case countries. Like in Sweden, rolling stock was
stated as the greatest investment. However, as minor barriers to entry in Poland were
mentioned loading areas, terminals, rail capacity, market knowledge and competition.
Therefore, we can conclude barriers to entry do exist in both case countries. Worth
mentioning is their amplitude: research revealed there are several barriers and market
entry is seen as a troublesome process. Therefore, according to this research the main
barriers to entry confronted by the railway undertakings in Sweden and Poland are
exogenous by nature: acquiring rolling stock, bureaucracy and the needed investments.
Without the railway liberalization, there would not be private railway undertakings and
competition within the market. Therefore the main effect created by the liberalization is
the possibility to enter the railway freight market. Research results state in both case
countries demand for railway transport was higher than expected. Therefore we can
conclude both markets had a need for increased number of railway undertakings.
Especially in Poland several railway undertakings unfolded the customers were looking
for new partners due to problems with price and customer service level. Since market
liberalization enabled new railway undertakings to enter the market, actors had to
improve services due to competition. Additionally, price level started to decrease.
Therefore both customers and service tenders capitalized the liberalization.
107
According to this research, the rail networks’ condition varies dramatically between
case countries. Swedish railway undertakings are really satisfied with the network:
repairs are conducted when necessary and Infrastructure Manager’s attitude towards
railway undertakings’ requests is acknowledged. Because the railway undertakings are
divided countrywide, only few places face congestions. The Middle and South Sweden
are the main areas for railway transport, and sometimes this creates problems. In
addition, railway undertakings noted the main harbors are busy during vessels’
departure and arrival. Due to the fact many railway undertakings are nichers and operate
in an own area, rail capacity is not seen overbooked. However, the situation is dissimilar
in Poland. The rail network is in really poor condition, affecting on the average
transport speed. All railway undertakings stated the concern against the rail network’s
condition. However, the Infrastructure Manager repairs the network annually with
European Union funding. Due to increased number of passenger traffic, the generality
of funds is guided to main passenger corridors. Therefore, the network used by freight
traffic is lacking behind. The main railway undertakings are using the network
countrywide, which sometimes causes congestions. Especially this is seen near-by big
cities, like Warsaw, Krakow and Gdansk. Therefore, we can conclude there are
discrepancies between case countries. Rail network’s good condition and mainly
congestion-free nature do boost competition in Sweden. However, in Poland the
situation is vice versa: the poor condition sets extra pressures on cost-effectiveness and
therefore do not boost competition.
Both intramodal and intermodal competition is noted in Swedish markets. However,
intramodal competition bisects the sentiment. The reason seems to stand at the old-boy
network: due to rather young age of liberalized railway freight market, employees share
a common background. This affects positively on the relationship, trust and cooperation.
It is outstanding how undertaking’s size affects on intramodal competition: the larger
railway undertaking becomes, less cooperation it has. We can conclude from the
Swedish sampling generally the railway undertakings having cooperation with other
railway undertakings do not face intramodal competition. Strategic groups presented in
figures 23 & 32 explicate the situation. Only the market leader’s coverage encompasses
the whole country, while others concentrate on smaller areas. A challenger entered the
markets as a late entrant, and it has gained a significant market share in rather short
time. Although railway undertaking can be categorized as challenger due to its attitude
towards market and the extent of its transportation, railway undertaking’s customer base
is rather small. However, it is aggressively enlarging its service area and tries to attract
new customers by offering innovative transport services. In addition to market leader
and a challenger, among sampling of six is four nichers. These railway undertakings
operate in rather small area, and they are not interested in competing with other service
offerers. According to this research, in order to compete against intermodal competition,
railway market should act as a congruent front. Road transport was noted as the main
substitute; sea transport’s threat was also noted.
The Polish market faces harder intermodal and intramodal competition. All interviewed
railway undertakings conceded there is intramodal competition; adjectives like hard,
aggressive and tough were used. Although competition is hard and aggressive, it was
noted to be positive by nature. Nevertheless, railway undertakings respect each other.
This seems to be rather important factor in a country where many railway undertakings’
transport cover the whole country. This was also concluded in strategic mapping.
108
However, it affects on railway undertakings’ market positions. In addition to one market
leader, Polish markets have three challengers who increase their market shares annually.
These railway undertakings focus on providing better customer service with innovative
transport possibilities. Among the research is one follower, who continues on the path
opened by the challengers. In addition, two railway undertakings are reckon among
nichers. Although they are interested in finding new business possibilities, railway
undertakings are mainly focused on serving a niche market.
Although intramodal and intermodal competition is present in both case countries, it is
more visual and aggressive in Poland. In Sweden, despite the lack of all railway
undertakings’ cooperation, railway market acts as a congruent front against intermodal
competition. This feature is missing from Polish market, where railway undertakings
rather work alone than as a group. This is concluded as the main problem in Polish
market: railway transport will continue to decline if railway undertakings do not join
forces and fight together against other transport modes. Therefore, research concludes
the endogenous barrier to entry, intramodal competition, might prevent new railway
undertakings to enter the railway freight market, but only in Poland. However, although
intermodal competition is hard in both countries concerned, it is not seen as entry
barrier.
Concluding from the results, new entrants confront various difficulties. Main barriers to
entry, acquiring of rolling stock and needed investments, are industry’s constant
characteristics; however, changes could be done concerning the bureaucracy. According
to this research, the Infrastructure Manager could assist potential railway undertakings
by organizing courses, educating own personnel and by providing flexibility in various
ways. According to railway undertakings, there is a focal need for a course, which
would gather all information concerning market entry: starting from the first needed
documents and licenses, presenting the railway sector’s actors and ending up to learning
how to fill in the needed applications. Therefore, the Infrastructure Manager could
organize once, twice a year an intensive course introducing the basics about entering the
railway freight market and operating as a railway undertaking. Additionally,
interviewees stated a concern towards Infrastructure Managers’ employees’ know-how.
Railway industry is totally own entity, which leads to the situation when entering the
market from outside, employees come across numerous challenges. Although railway
undertakings do understand it takes some time to adapt and learn the market
peculiarities, they hope more attention would be paid to train the personnel before they
start to work with railway undertakings. Additionally, railway undertakings stated a
wish to increase the overall level of personnel’s know-how. The flexibility and
congruence should be increased. Flexibility is especially needed in rail capacity
allocations: in order to compete against road transport, railway undertakings need to
receive information about possible time frames earlier. Especially the problem emerged
in case of ad hoc transports, where information must be received in hours, not in days.
Although railway undertakings thought they all are treated equally, they still wish the
congruence would be enhanced, especially in international transports. Finally, although
the Network Statement is seen as a useful publication, more tools instead of words
would be needed. Therefore, more informative publications are requested, instead of
thick publications which provide nothing new.
109
Extrapolating from the research results, Infrastructure Manager could enhance its
service towards new entrants by various ways. According to this research, entry process
could be enhanced by organizing intensive courses giving detailed information about
the procedure and needed documents. Service could be improved by strengthening the
personnel’s know-how. Because the Network Statement is a harmonized publication
within European Union, Infrastructure Manager could consider publishing a national
complement, which would tackle the mentioned deficiencies. This has been noted in
Finland: the Finnish Infrastructure Manager publishes “Access Guide for Railway
Undertakings”.
8.2
Theoretical implications
The most significant contribution of this research was to examine how the barriers to
entry and market entry strategies affect on private railway undertakings’ entry process
after the liberalization. In addition, the intention was to examine if the results correlate
with previous findings. Although several researchers have studied the deregulated
railway market (see for example Boyer, 1987; Brewer, 1996; Hilmola & Szekely, 2007;
Hilmola et al., 2007; Jahanshahi, 1998; Szekely, 2009; Woodburn, 2003; Woodburn,
2007), only a little contribution has been given to comparison between Eastern and
Western countries. Additionally, previous studies have mainly used second-hand data
and literature analyses; therefore there was a crucial need for research using first-hand
data gathered from the actor level by interviewing experts who have experienced the
process, in order to either confirm or impugn the earlier results. This study attempts to
tackle this gap.
Barriers to entry, based on competition theory, have found favour with researchers since
1950s, when Joe S. Bain introduced the scheme of things that potential competition may
lead established companies to sacrifice present profits in order to prevent entry.
Pehrsson (2009), building on insights of Shepherd (1979), has recently stated a barrier
to entry can be classified as either exogenous or endogenous. According to several
researchers (Brewer, 1996; Ludvigsen & Osland, 2009; Mortimer et al., 2009; Mäkitalo,
2007; Steer Davies Gleave Sweden, 2003), the main barriers to entry in railway industry
are exogenous barriers: acquiring the rolling stock and bureaucracy. In addition, there
are differences between countries. In UK Brewer’s study (1996) concluded perceived
level of infrastructure charges was also seen a barrier. In Finland (Mäkitalo, 2007) and
Sweden (Steer Davies Gleave Sweden, 2003) researches estimated the difficulty of
accessing the services creates a great market entry barrier. Cantos & Campos (2005)
state also intermodal competition can create the market entry barriers. In addition,
Mäkitalo (2007) noted attracting personnel might create a barrier. Research confirms the
earlier results by perceiving the main barriers to entry in Sweden and Poland are
acquiring rolling stock and bureaucracy. However, some discrepancies were found.
Although infrastructure charge was seen significantly large in Poland, it was not seen as
a barrier to entry. Additionally, difficulty to access services and intermodal competition
were mentioned only once. Interestingly, research results state attracting employees is
not a barrier. Naturally, the dominant economic situation affects on personnel’s
availability.
Market entry is a process including various steps. Koch (2001) presented the importance
of factors which should be carefully noted before choosing the actual entry strategy.
110
Due to limited resources, especially small railway undertakings should pay special
attention to these elements (Benito & Welch, 1994). In addition to start-ups, mainly
utilized market entry strategies are vertical integration, strategic alliances and
subsidiaries (Blomstermo et al., 2006; Kotler, 1988; Kotler, 2000; Lee et al., 2000).
Mäkitalo (2007) found the same strategies are used also in railway market. This
research confirms the cognizance.
8.3
Managerial implications
When considering entering to the railway freight market, various factors need to be
concerned. Before entering, both internal and external factors should be examined.
Possible entry strategies are start-up for new railway undertakings and vertical
integration, subsidiaries or alliances for mature organizations. However, the entry
strategy should be contemplated carefully, as strategies differ dramatically. The amount
of needed capital cannot be emphasized too much: due to railway market’s nature,
railway undertakings need to invest remarkable amounts to rolling stock. Therefore,
new entrants should consider various ways to finance the market entry. Especially the
potential of venture capitalists and business angels should be concerned.
Railway freight market confronts strong barriers to entry, including both exogenous and
endogenous barriers. This research confirmed the main market entry barriers are
acquiring rolling stock and bureaucracy. Therefore, before entering the market railway
undertaking should disentangle where the rolling stock could be acquired. According to
results, the main problem is with locomotives, due to availability and needed
investments. Bureaucracy has surprised many railway undertakings, therefore entrant
should familiarize with the documents in early stage. Worth mentioning is the time to
market: due to great number of needed documents, petition proceedings might surprise
the candidates. However, the minor barriers to entry should not be elided. According to
this research, rail capacity, market knowledge, competition, finding the customer and
availability of loading areas are the minor market entry barriers. The barriers vary
between countries; therefore national peculiarities should be perceived.
8.4
Limitations and suggestions for future research
Certain limitations should be kept in mind when interpreting the results. Firstly, this
research’s findings contemplate the situation in Sweden and Poland; although findings
match with earlier studies, every country has own peculiarities which might affect on
the end result. Due to the fact only one person was interviewed per railway undertaking
and all interviewees were managers or working in such a position, this might have an
effect on the results. In addition, although sampling included various types of
companies (market leader, challengers and nichers) from both studied market areas, not
all railway undertakings on the market were interviewed.
Secondly, this study concentrates only on railway freight market, passenger traffic
market is excluded from the study. Thirdly, the study approaches the cases on market
based view; resource-based view was not utilized in the research. Research’s main
intention was to study the railway freight market as an entity, whereas resource-based
view tackles the company’s key resources. Therefore resource-based view does not
111
examine the correct factors. Although some factors were concerned while accumulating
the information, the main interest was on market-based view.
Research’s reliability was confirmed by recording all the interviews. Therefore the
information was available for second or third re-checks if something seemed unclear.
Because the research was theme-interview where only the main themes are scripted,
interviewer’s way to act might have an impact on the results. However, because the
main results confirmed the earlier studies based on literature analyses, we can conclude
the research’s reliability is good. Additionally, careful description of the analyzing
process increases the reliability. Validity was examined by organizing a test-interview.
Interviewee has decade’s history in the field of railway transport; in addition, his
employer intends to enter the Finnish railway freight market in 2010. In accordance
with his proposal, few questions were added. Therefore we can state the research’s
validity is good.
Due to the fact research concentrated on market based view, it would be interesting to
see how the results would differ if resource-based view would be utilized. Additionally,
in-depth study concentrating on a certain types of railway undertakings, for example
challengers in Poland, could provide interesting perspective to railway freight market.
Although research results confirm the earlier outcomes and therefore can be considered
as reliable, a more extensive research on the same market areas could provide even
more information. Additionally, research could include comments from various actors
inside a railway undertaking: engine drivers’ opinion concerning the rail network’s
condition could be totally different than this research’s outcome.
112
REFERENCES
Aharoni, Y & Nachum, L (2000). The Origins of the International Competitiveness of
Firms, Journal of Economics, vol. 71, no. 1, pp. 91–94 (Book review)
Alexandersson, G, Hulten, S, Nordenlöw, L & Ehrling, G (2000). Spåren efter
avregleringen. (Free translation: tracks after deregulation) Kommunikations Forsknings
Beredningen (KFB) Rapport, 2000.
Alexandersson, G & Hulten, S (2005). Swedish Railways: from Deregulation to
Privatization and Internationalisation in a European Context, Conference paper: Third
Conference on Railroad Industry Structure, Competition and Investment, Stockholm,
Sweden 2005.
Alexandersson, G & Hulten, S (2008). Swedish Railway Deregulation Path, Review of
Network Economics, vol.7, issue 1, pp. 18–36.
Bain, JS (1949). A Note on Pricing in Monopoly and Oligopoly, The American
Economic Review, vol. 39, no. 2, pp. 448–464.
Bain, JS (1956). Barriers to New Competition, Harvard University Press, Cambridge
MA.
Banverket (2008). The Network Statement 2010 part 1, edition 12-12-2008.
Banverket (2009), Available at URL: http://www.banverket.se Retrieved January 2009
Banverket, Sector Report (2009), Sector Report 2007. Available at URL:
http://www.banverket.se/pages/12128/sektorsrapporter/BV_SEKTOR_07_ENG_WEB
B_x.pdf Reviewed April 2009
Baron, DP (1973). Limit Pricing, Potential Entry, and Barriers to Entry, the American
Economic Review, vol. 63, no. 4, pp. 666–674.
Baye, M R (2005). Managerial Economics and Business Strategy, McGraw-Hill
International Edition, Fifth edition
Begg, D, Fischer, S & Dornbusch, R (1994). Economics, fourth edition, McGraw-Hill
Book Company Europe, London
Benito, GRG & Welch, LS (1994). Foreign Market Servicing: Beyond Choice of Entry
Mode, Journal of International Marketing, vol. 2, issue 2, pp. 7–28.
Benson, D, Bugg, R & Whitehead, G (1994). Transport and Logistics, WoodheadFaulkner Limited, Hertfordshire
Bereskin, CG (1996). Econometric Estimation of the Effects of Deregulation on
Railway Productivity Growth, Transportation Journal, summer, pp. 34–43.
113
Blomstermo, A, Sharma, DD & Sallis, J (2006). Choice of Foreign Market Entry Mode
in Service Firms, International Marketing Review, vol. 23, no. 2, pp. 211–229.
Bowles, S & Gintis, H (1993). The Revenge of Homo Economicus: Contested
Exchange and the Revival of Political Economy, Journal of Economic Perspectives, vol.
7, no. 1, pp. 83–102.
Boyer, KD (1987). The Cost of Price Regulation: Lessons from Railroad Deregulation,
RAND Journal of Economics, vol. 18, no. 3, autumn 1987.
Brewer, PR (1996). Contestability in UK Rail Freight Markets”, Transport Policy, vol.
3, no. 3, pp. 91–98.
Brown, S & Eisenhardt, K (1997). The Art of Continuous Change: Linking Complexity
Theory and Time-Paced Evolution in Relentlessly Shifting Organizations,
Administrative Science Quarterly, vol. 42, pp. 1–34.
Cantos, P & Campos, J (2005). Recent Changes in Global Rail Industry: Facing the
Challenge of Increased Flexibility, European Transport, no. 29, pp. 1–21.
Cargonet (2009). Facts about CargoNet group. Available at URL
http://www.cargonet.no/e6ed78e6-e35a-4e7a-bd60-adcf74d3f9a8.fodoc Retrieved May
2009
Casaca, ACP & Marlow, PB (2007). The Impact of the Trans-European Transport
Networks on the Development of Short-Sea Shipping, Maritime Economics and
Logistics, 2007, vol. 9, pp. 302–323.
Caves, RE & Porter, ME (1977). From Entry Barriers to Mobility Barriers: Conjectural
Decisions and Contrived Deterrence to New Competition, Quarterly Journal of
Economics, vol. 91, issue 2, pp.
Central Statistical Office (2008). Transport –Activity Results in 2007, CSO Trades and
Services Division
Dawson, J (2001). Strategy and Opportunism in European Retail Internationalization,
British Journal of Management, vol. 12, no. 4, pp. 253–266.
Deakins, D (1996). Entrepreneurship and Small Firms, McGraw-Hill, London
De Jorge, J & Suarez, C (2003). Has the Efficiency of European Railway Companies
been Improved?, European Business Review, vol. 15, no. 4, pp. 213–220.
Edström, A & Tullberg, M (1998). Making Sense of Business – Reorganizing Processes
in Swedish Rail, Center for Research on Organizational Renewal (CORE)
Eisenhardt, KM & Bourgeois, LJ (1988). Politics of Strategic Decision Making in High
Velocity environments: Toward a Mid-Range Theory, Academy of Management
Journal, vol. 31, no. 4, pp. 737–770.
114
Eisenhardt, KM (1989). Building Theories from Case Study Research, Academy of
Management Review, vol. 14, no. 4, pp. 532–550.
EU Directive (1992), Council Directive 91/440/EEC of 29 July 1991 on the
development of the Community’s railways, Available at URL: http://eurlex.europa.eu/smartapi/cgi/sga_doc?smartapi!celexapi!prod!CELEXnumdoc&lg=en&n
umdoc=31991L0440&model=guichett Retrieved February 2009
Éuractiv (2008). “MEPs want liberalization of railway passenger services by 2008”.
Available at URL: http://www.euractiv.com/en/transport/meps-want-liberalisationrailway-passenger-services-2008/article-115873 Retrieved February 2009
European Union (2007). EU-25 Energy and Transport Outlook 2003. Available at URL:
http://ec.europa.eu/dgs/energy_transport/figures/trends_2030/5_chap4_en.pdf Reviewed
April 2009
European Union (2008) Overviews of European Union, Available at URL:
http://europa.eu/pol/trans/overview_en.htm Retrieved January 2009
European Union (2009). Summaries of legislation. Available at URL:
http://europa.eu/scadplus/leg/en/lvb/l24057 Retrieved February 2009
Eurostat (2009). Transport in the EU27; Inland freight transport up by 5 % in 2006.
Available at URL:
http://epp.eurostat.ec.europa.eu/pls/portal/docs/PAGE/PGP_PRD_CAT_PREREL/PGE
_CAT_PREREL_YEAR_2008/PGE_CAT_PREREL_YEAR_2008_MONTH_04/710042008-EN-AP.PDF Retrieved February 2009
Eurostat, Transport (2009). Transport. Available at URL:
http://epp.eurostat.ec.europa.eu/portal/page?_pageid=0,1136228,0_45572948&_dad=po
rtal&_schema=PORTAL Retrieved February 2009
Farmer, DJ (1997). Contemporary conceptual space: reading Adam Smith, Journal of
Management History, vol. 3, no. 3, pp. 246–255.
Feka,V, Xouris,D & Tsiotras,G (1997). Mapping Strategic Groups: an International
Example, Journal of Business & Industrial Marketing, vol. 12, no. 1, pp. 66–75.
Gable, M, Topol, MT, Mathis, S & Fisher, ME (1995). Entry Barriers in Retailing,
Journal of Retailing and Consumer Services, vol. 2, no. 4, pp. 211–221.
Gibb, R, Lowndes, T & Charlton, C (1996). The Privatization of the British Rail,
Applied Geography, vol. 16, no. 1, pp. 35–51.
Gomez-Ibanez, JA (2004). Railroad Reform: an Overview of the Options, Conference
Proceedings of the Railway Reform, Madrid, Spain.
115
Green Cargo (2009). Available at URL: http://www.greencargo.com Retrieved January
2009
Hatano, L (2004). Complexity versus Choice: UK Rail Fares, Japan Railway &
Transport Review 37, January 2004.
Hatten, KJ & Hatten, ML (1987). Strategic Groups, Asymmetrical Mobility Barriers
and Contestability, Strategic Management Journal, vol. 8, pp. 329–342.
Hector Rail (2009). Available at URL: http://www.hectorrail.com/ Retrieved May 2009
Helsingin Sanomat (6.3.2009). ”Yksityisyritys pyrkii rautateiden rahtiliikenteeseen”.
(Free translation: Private enterprise aims to enter the railway freight transport)
Available at URL:
http://www.hs.fi/kotimaa/artikkeli/Yksityinen+yritys+pyrkii+VRn+kilpailijaksi+rahtilii
kenteeseen/1135244096965?ref=rss Retrieved March 2009
Hertz, S (1996). The Dynamics of International Strategic Alliances, A Study of Freight
Transport Companies, International Studies of Management and Organization, vol. 26,
no. 2, pp. 104–130.
Hibbs, J (2003). Transport Economics & Policy, Kogan Page Limited.
Hilletofth, P, Lorenz, H, Savolainen, V-V, Hilmola, O-P & Ivanova, O (2007). Using
Eurasian Landbridge in Logistics Operations: Building Knowledge through Case
Studies, World Review of Intermodal Transportation Research, Vol. 1, No. 2, pp. 183–
201.
Hilmola, O-P (2003). Two Different Sides of Case-study Research: Using Deductive
and Inductive Approach, Publications of the Turku School of Economics and Business
Administration. Series B 1:2003.
Hilmola, O-P, Ujvari, S and Szekely, B (2007). Deregulation of railroads and future
development scenarios in Europe: analysis of the privatisation process taken place in the
USA, the UK and Sweden, World Review of Intermodal Transportation Research, Vol.
1, No. 2, pp. 146–169.
Hirsjärvi, S & Hurme, H (2001). Tutkimushaastattelu. Teemahaastattelun teoria ja
käytäntö. (Free translation: Research interview. Theme interview’s theory and practice),
Yliopistopaino, Helsinki.
Hirsjärvi, S, Hurme, H & Sajavaara, P (2004). Tutki ja Kirjoita. (Free translation:
Research and Write), Gummerus Kirjapaino Oy, Jyväskylä.
History of European Union (2008). Available at URL:
http://europa.eu/abc/history/index_en.htm Retrieved January 2009
Holmgren, M (2005). Maintenance Related Losses at the Swedish Rail, Journal of
Quality in the Maintenance Engineering, vol. 11, no. 1, pp. 5–18.
116
Häkkinen, L & Hilmola, O-P (2005). Methodological Pluralism in Case Study
Research: an Analysis of Contemporary Operations Management and Logistics
Research, International Journal of Services and Operations Management, Vol. 1, Issue
3, pp. 239–256.
Iikkanen, P (2007). Rautateiden tavaraliikenteen kilpailun kohdistuminen ja vaikutusten
arviointi (Free translation: The Realization of Competition in Railway Goods Traffic
and an Evaluation of its Effects), Ratahallintokeskus, Strategioita ja selvityksiä 1/2007.
The Finnish Rail Administration, Strategies and Studies by the Finnish Rail
Administration 1/2007
Iisalmen Sanomat (15.1.2009). TR-Group hyppää näillä näkymin kiskoille ensi vuonna.
(Free translation: TR-Group enters the market next year). Available at URL:
http://www.iisalmensanomat.fi/uutiset/yla-savo/tr-group-hypp%C3%A4%C3%A4kiskoille-n%C3%A4ill%C3%A4-n%C3%A4kymin-ensi-vuonna/333860 Retrieved
February 2009
Jahanshahi, MF (1998). The US Railroad Industry and Open Access, Transport Policy,
vol. 5, pp. 73–81.
Jensen, A & Stelling, P (2007). Economic impacts of Swedish Railway Deregulation: a
Longitudinal Study, Transportation research Part E 43, pp. 516–534.
Järnvägsstyrelsen (2007). Branschanalys av Järnvägsföretag (Free translation: Railway
companies’ branch analysis). Rapport 2007:1.
Järnvägsstyrelsen, (2008). Nyckeltanalys av Järnvägsföretag (Free translation: Railway
companies’ parameter analysis). Rapport 2008:5.
”K” Line (2009). Available at URL: http://www.klineurope.com/ Retrieved April 2009
Keegan, WJ (1984). Multinational Marketing Management, Prentice-Hall, Inc. New
Jersey. Third edition.
Koch, AJ (2001). Factors Influencing Market and Entry Mode Selection: Developing
the MEMS Model, Marketing Intelligence and Planning, vol. 19, issue 5, pp. 351–361.
Koskinen, I, Alasuutari, P & Peltonen, T (2005). Laadulliset menetelmät
kauppatieteissä, (Free translation: qualitative methods in business studies), Gummerus
kirjapaino, Jyväskylä
Kotler, P, Fahey, L & Jatusripitak, S (1986). The New Competition, Prentice / Hall
International UK Ltd
Kotler, P (1988). Marketing Management; Analysis, Planning, Implementation and
Control, Sixth Edition, Prentice-Hall, Inc., A Division of Simon & Schuster, Englewood
Cliffs, New Jersey 07632
117
Kotler, P (2000). Marketing Management; the Millennium Edition, Prentice-Hall
International
Kotler, P & Scheff, J (1997). Standing Room Only, Harvard Business School Press,
Boston, Massachusetts
Kotler, P & Andreasen, AR (2000). Strategic Marketing for Non-profit Organizations,
in Baker MJ (ed.), Marketing Theory, Cengage Learning EMEA
Krippendorff, K (2004). Content Analysis: An Introduction to its Methodology. Second
edition. SAGE Publications, London.
Kustin, RA (2004). Marketing Mix Standardization: A Cross-Cultural Study of Four
Countries, International Business Review, vol. 13, pp. 637–649.
L555/2006; Rautatielaki (2006). Railway Act 29.6.2006 / 555. Available at URL:
http://www.finlex.fi/fi/laki/ajantasa/2006/20060555 Reviewed May 2009
Lee, KS, Lim, GH & Tan, SJ (2000). Feasibility of Strategic Alliance as an Entry
Strategy into Markets Dominated by Major Competitors, Journal of Small Business and
Enterprise Development, vol. 7, no. 1, pp. 43–57.
Ludvigsen, J, & Osland, O (2009). Liberalization of Rail Freight Markets in the Old and
New EU-Member States, European Journal of Transport and Infrastructure Research,
issue 9 (1), pp. 31–45.
Lukka, K & Kasanen, E (1995). The Problem of Generalizability: Anecdotes and
Evidence in Accounting Research, Accounting, Auditing and Accountability Journal,
vol. 8, no. 5, pp. 71–90.
LVM, Liikenne- ja viestintäministeriö (Ministry of Transport and Communications
Finland) (2009). Available at URL: http://www.lvm.fi/web/fi/etusivu Retrieved May
2009
Macht, SA & Robinson, J (2009). Do Business Angels Benefit their Investee
Companies?, International Journal of Entrepreneurial Behavior and Research, vol. 15,
issue 2, pp. 187–208.
Mahon, J & Murray, E (1981). Strategic Planning for Regulated Companies, Strategic
Management Journal, vol. 2, pp. 251–262.
Makadok, R (1988). Can First-mover and Early-mover Advantages Be Sustained in an
Industry with Low Barriers to Entry / Imitation?, Strategic Management Journal, vol.
19, issue 7, pp. 683–697.
Marco Polo (2009) Available at URL:
http://ec.europa.eu/transport/marcopolo/home/home_en.htm Retrieved January 2009
118
McAfee, RP, Malon, HM & Williams, MA (2004). When are Sunk Costs Barriers to
Entry? Entry Barriers in Economic and Antitrust Analysis; What Is a Barrier to Entry?,
AEA Papers and Proceedings, vol. 94, no. 2, pp. 461–465.
McDonald, G & Roberts, C (1992). What You Always Wanted to Know about
Marketing Strategy… But were too Confused to Ask, Management Decision, vol. 30,
issue 7, pp. 54– 60.
McGee, J & Thomas, H (1986). Strategic Groups: Theory, Research and Taxonomy,
Strategic Management Journal, vol. 7, pp. 141–160.
Melck, Brendan (2008), Poland’s Rail Cargo Sector Headed in Wrong Direction,
Warsaw Business Journal (edited version), Available at URL:
http://www.cbw.cz/en/poland%E2%80%99s-rail-cargo-sector-headed-in-wrongdirection/7498.html Retrieved March 2009
Merton, RK, Fiske, M and Kendall, PL (1956). The Focused Interview, New York, Free
Press
Miller, D (1987). The Structural and Environmental Correlates of Business Strategy,
Strategic Management Journal, vol. 8, pp. 55–76.
Ministry of Transport and Communications (2002). Transport Infrastructure 2030,
Meeting the Challenges of Concentrating Population and Industrial Changes,
Programmes and Strategies 3/2002.
Mitchell, DE (1988). A Growth Strategy for Start-Up Businesses, Journal of Business
Strategy, vol. 9, issue 4, pp. 45–48.
Mortimer, P, Zunder, T & Robinson, M (2009). House of Lords Position Paper,
NewRail, Centre for Railway Research, Newcastle University, UK.
Mäkitalo, M (2007) Market Entry and the Change in Rail Transport Market when
Domestic Freight Transport Opens to Competition in Finland, Tampere University of
Technology, Publication 702
Nash, CA & Preston, JM (1992). Barriers to Entry In The Railway Industry, Institute of
Transport Studies, University of Leeds. Working Paper 354
OECD (1997). Liberalisation in the Transportation Sector in North America, Available
at URL: http://www.oecd.org/dataoecd/14/9/2386841.pdf Retrieved January 2009
Patton, MQ (2002). Qualitative Research and Evaluation Methods. SAGE Publications.
Pehrsson, A (2004). Strategy Competence: a Successful Approach to International
Market Entry, Management Decision, vol. 42, no. 6, pp. 758–768.
Pehrsson, A (2009). Barriers to Entry and Market Strategy: a Literature Review and a
Proposed Model, European Business Review, vol. 21, no. 1, pp. 64–77.
119
PKP Cargo SA (2009). Available at URL: http://www.pkp-cargo.pl/ Retrieved April
2009
PKP LHS SA (2009). Available at URL: http://www.lhs.com.pl/l/en Retrieved April
2009
PKP PLK SA (2008). The Network Statement 2008/2009. Available at URL:
http://www.plk-sa.pl/fileadmin/pdf/OFERTA_CALOSC/E_08-09_NS_v.1.3.pdf
Retrieved February 2009
PKP PLK SA (2009). Available at URL: http://www.plk-sa.pl/en.html Retrieved March
2009
Poland society (2009). Available at URL:
http://www.poland.gov.pl/Poland’s.way.to.UE.458.html Retrieved February 2009
Porter, ME (1979). The Structure within Industries and Companies’ Performance,
Review of Economics and Statistics, vol. 61, issue 2, pp. 214–227.
Porter, ME (1980). Competitive Strategy; Techniques for Analyzing Industries and
Competitors, the Free Press, New York
Profillidis, VA (2004). Experiences from Liberalisation of Road and Rail Transport,
Maritime Economics and Logistics, vol. 6, pp. 270–273.
Quinet, E & Vickerman, R (2004) Principles of Transport Economics, Edward Elgar
Publishing Limited, UK
RailNetEurope (2009).Available at URL:
http://www.railneteurope.com/cont/rnetools_network.aspx Reviewed April 2009
RHK (2006). (The Finnish Rail Administration). Available at URL:
http://rhk-fibin.directo.fi/@Bin/1629c483d907da988ba24eb01fa1bc47/1229694184/application/pdf
/1547814/Suomen_rataverkko906.pdf Reviewed December 2008
RHK (2008). (The Finnish Rail Administration). The Finnish Railway Statistic”,
Helsinki
RHK the Network Statement (2008). (The Finnish Rail Administration). Finnish
Network Statement 2010, F 5 / 2008, Proinno Design Oy, Sodankylä
RHK (2009). (The Finnish Rail Administration). Available at URL:
http://www.rhk.fi/in_english/ Retrieved April 2009
Rikstrafiken (2009). Available at URL: http://www.rikstrafiken.se/Default.aspx
Reviewed May 2009
120
Robertson, M, Collins, A, Medeira, N & Slater, J (2003). Barriers to Start-up and Their
Effect on Aspirant Entrepreneurs, Education + Training, vol. 45, no. 6, pp. 308–316.
Routio, P (2007). Arteology, research of products and professions, Available at URL:
http://www2.uiah.fi/projects/metodi/ Retrieved April 2009
Schivelbusch, W (1977). Geschichte der Eisenbahnreise. Zur Industrialisierung von
Raum und Zeit im 19. Jahrhundert, Finnish translation “Junamatkan historia”, (Free
translation: the rail journey’s history), Gummerus Kirjapaino, Jyväskylä 1996.
Schmalensee, R (1981). Economies of Scale and Barriers to Entry, Journal of Political
Economy, vol. 89, no. 6, pp. 1228–1238.
SIKA Institute (2008), Bantrafik 2007 (free translation Rail traffic 2007), Statens
institut för kommunikationsanalys, SIKA Statistik 2008:29. Available at URL:
http://www.sika-institute.se/Doclib/2008/Statistik/ss_2008_29.pdf Retrieved April 2009
Smith, A & McCulloch, JR (1863). An Inquiry into the Nature and Causes of the
Wealth of Nations, Edinburgh, Adam and Charles Black
Smith, KG & Grimm, CM (1987). Environmental Variation, Strategic Change and Firm
Performance: A Study of Railroad Deregulation, Strategic Management Journal, vol. 8,
pp. 363–376.
Smith, KG & Grimm, CM (1991). Research Notes and Communications Management
and Organizational Change: a Note on a Railway Industry, Strategic Management
Journal, vol. 12, pp. 557–562.
Sørheim, R (2005). Business Angel as Facilitators for Further Finance: An Exploratory
Study, Journal of Small Business and Enterprise Development, vol. 12, no. 2, pp. 178–
191.
Steer Davies Gleave, Poland (2003). EU Rail Liberalization: Extended Impact
Assessment, Regulatoru Overview of Poland, Technical Note, December 2003,
European Commission
Steer Davies Gleave, Sweden (2003). EU Rail Liberalization: Extended Impact
Assessment, Country Case Study: Sweden, December 2003, European Commission.
Strauss, A & Corbin, J (1998). Basics of Qualitative Research. Techniques and
Procedures for Developing Grounded Theory. Second edition. SAGE Publications,
London.
Sutton, RI & Callahan, AL (1987). The Stigma of Bankruptcy: Spoiled Organizational
Image and its Management, Academy of Management Journal, vol. 30, issue 3, pp. 405–
436.
121
Szekely, B & Hilmola, O-P (2007). Analysis from the Liberalization Process of Swiss,
Japanese, Polish and Hingarian Railways, Lappeenranta University of Techology,
Department of Industrial Engineering and Management
In Hilmola, O-P 2007, Third Research Meeting Held at Kouvola – Value Adding Role
of Logistics in Northern Europe, Lappeenranta University of Technology, Department
of Industrial Engineering and Management, Research Report 183
Szekely, B (2009). Liberalization of the Railway Industry in Europe: Toward a
Sustainable System through Process View”, International Journal of Sustainable
Economy, vol. 1, no.2, pp. 167–185.
Taylor, Z & Ciechanski, A (2006). Deregulation in Polish rail transport, Transport
Reviews, Vol. 26, No. 3, pp. 305–324.
The Economic Intelligence Unit EIU (2007). Transport, Communications and the
Internet, Country Profile 2007, Poland
The Ministry of Enterprise, Energy and Communications (2009). Transport Policy for
Sustailable Development. Available at URL:
http://www.regeringen.se/sb/d/2156/a/20469 Retrieved May 2009
The Rail Liberalization Index (2007). Available at URL:
http://www.deutschebahn.com/site/shared/en/file__attachements/position__papers/study
__rail__liberalisation__index__2007__summary.pdf Retrieved January 2009
The summary of White Paper (2001). Available at URL:
http://europa.eu/scadplus/leg/en/lvb/l24007.htm Retrieved January 2009
The White Paper (1992). The Future Development of the Common Transport Policy.
Available at URL:
http://aei.pitt.edu/1116/01/future_transport_policy_wp_COM_92_494.pdf Retrieved
January 2009
The White Paper (1996). Available at URL:
http://europa.eu/documents/comm/white_papers/pdf/com96_421_en.pdf Retrieved
January 2009
Tågåkeriet (2009). Available at URL: http://www.tagakeriet.se/ Retrieved May 2009
Transportstyrelsen (2009). About us. Available at URL:
http://www.transportstyrelsen.se/en/About-us/ Retrieved May 2009
TransPress (2009). VR Cargo’s customer magazine. 1/2009, Helsinki.
Tse, ACB, Sin, LYM, Yau, OHM, Lee, JSY & Chow, R (2004). A Firm’s Role in the
Marketplace and the Relative Importance of Market Orientation and Relationship
Marketing Orientation, European Journal of Marketing, vol. 38, issue 9/10, pp. 1158 –
1172.
122
Tyrrall, D (2004). The UK Railway Privatization: Failing to Succeed?, Economic
Affairs, vol. 24, no. 3, pp. 32–39.
UNECE (United Nations Economic Commission of Europe) (2009). Transport situation
in Poland in 2007, Available at URL:
http://www.unece.org/trans/doc/transsitdocs/2007poland.pdf Reviewed February 2009
Vassallo, JM & Fagan, M (2005).Nature or Nurture: Why Do Railroads Carry Greater
Freight Share in the United States than in Europe?, Research Working Paper Series,
December 20, 2005 WP05-15.
Von Weizsäcker, CC (1980). Barriers to Entry, a Theoretical Treatment, Springer,
Berlin
VR Limited (2009). Available at URL: http://www.vrgroup.fi/index.html Retrieved
April 2009
Wallace, DH (1936). Monopolistic Competition and Public Policy, the American
Economic Review, vol. 26, no. 1, pp. 77–87.
Wiltbank, R (2005). Investment Practices and Outcomes of Informal Venture Investors,
Venture Capital, vol. 7, no. 4, pp. 343–358.
Woodburn, AG (2003). A Logistical Perspective on the Potential for Modal Shift of
Freight from Road to Rail in Great Britain, International Journal of Transport
Management, vol. 1, pp. 237–245.
Woodburn, A (2007). Appropriate Indicators of Rail Freight Activity and Market Share:
A Review of UK Practice and Recommendations for Change, Transport Policy, vol. 14,
pp. 59–69.
WTO (2008). Trade in Commercial Services by Category. Available at URL:
http://www.wto.org/english/res_e/statis_e/its2008_e/section3_e/its08_highlights3_e.pdf
Retrieved February 2009
Wronka, J (2007). Development of the Railway Transport in Poland, University of
Szczecin
Yin, RK (1981). The Case Study Crisis: Some Answers, Administrative Science
Quarterly, vol. 26, issue 1, pp. 58–65.
ZDG TOR, (2009). Transport Szynowy Statystyki i Analizy, nr. 1 (6) / 2009 Luty (free
translation Transportation Statistics and Analysis), ISSN 1898-9500
Appendix 1 / 1 (2)
Måndag, 12 januari 2009
Kouvola, Finland
Bästa Mottagare / Företagets namn
EN STUDIE KRING MARKNADSINTRÄDE PÅ SVENSKA/POLSKA
JÄRNVÄGSMARKNADEN INOM GODSTRANSPORTSEKTORN –
INSAMLING AV KUNSKAPER OCH ERFARENHETER FRÅN FINSKA
STATLIGA ORGANISATIONER FÖR ATT STÖDJA PRIVATA FÖRETAG
Uppbyggnaden av den Europeiska järnvägsmarknaden förändrades den 1 januari 2007,
när järnvägsmarknaderna i alla EU medlemsstater avreglerades. Vid det aktuella
tillfället var det ytterst få länder som sedan tidigare avreglerat järnvägsmarknaden,
Finland var ett av de länder som gjort detta och det skedde i början av år 2007.
Jag är i slutskedet av mina högskolestudier (magisterexamen i ekonomi) vid
Villmanstrands tekniska universitet (Villmanstrand, Finland, www.lut.fi). Min
magisteruppsats är en del av ett projekt vid den finska Banförvaltningscentralen
(organisation är statliga och leasar järnvägsnätet). Projektet har för avsikt att upptäcka
de främsta hindren för inträde på marknaden och marknadsinträdesstrategier i två
europeiska länder, Sverige och Polen. Målet med projektet är att öka förståelsen kring
processen och hur statliga organisationer kan förbättra sin service gentemot nya aktörer
på marknaden. Forskningen sker genom att intervjua företagets representanter i båda
dessa länder. Handledare för magisteruppsatsen är professor Olli-Pekka Hilmola från
Villmanstrands tekniska universitet, Kouvola forskningscentrum och direktör Miika
Mäkitalo från Finska Banförvaltningscentralen.
Sverige avreglerade järnvägsmarknaden i slutet av 90-talet och Polen i början av 2000.
Numera har dessa marknader ett stort antal nya aktörer, vilka vunnit betydande
marknadsandelar på godsmarknaden. Syftet med denna studie är att skapa en förståelse
kring de särskilda egenskaper som är viktiga på marknaden efter att en avreglering skett.
Ditt företag har en viktig roll på den Svenska/Polska järnvägsmarkanden och därför är
Ditt bidrag till denna forskning mycket värdefullt. Intervjuerna är en viktig del av
projektet eftersom dessa ger värdefull information om hur avregleringen påverkat
järnvägsmarknaden ur ett företagsperspektiv. Ditt företags erfarenheter skulle hjälpa till
att samla värdefull information.
Appendix 1 / 2 (2)
Intervjuerna kommer att genomföras i Sverige och Polen under februari-mars 2009.
Intervjun kommer att ta en till två timmar. Jag skulle uppskatta att få din bekräftelse av
intresse via e-post till adressen [email protected]. Därefter kan vi boka ett möte för en
intervju.
Med vänlig hälsning
BBA Milla Laisi
Forskningsassistent
Villmanstrand Univ. av Tech., Kouvola forskningscentrum
E-post: [email protected]
Mobil: +358 50 380 5808
Olli-Pekka Hilmola
Prof., Villmanstrand Univ. av Tech. Kouvola forskningscentrum, Finland, ED
Gäst Professor, Högskolan Skövde, Sverige
E-post: [email protected]
Mobil: +358 40 761 4307
Appendix 2 / 1 (2)
Friday, January 09, 2009
Kouvola, Finland
Dear Recipient / COMPANY NAME
A STUDY OF MARKET ENTRY INTO POLISH / SWEDISH RAILWAY
FREIGHT MARKETS – GATHERING LEARNING POINTS FOR FINNISH
GOVERNMENTAL ORGANISATIONS TO SUPPORT PRIVATE
UNDERTAKINGS
The structure of European Railway market changed 1st January 2007, when the railway
freight markets were opened in all of the European Union’s member states. Although,
few countries had liberalised the markets earlier, Finland was among the countries that
faced the new situation in the beginning of year 2007.
I am in the final stages of my master’s studies (Econ.) at Lappeenranta University of
Technology (Lappeenranta, Finland, www.lut.fi). My master’s thesis is a part of The
Finnish Rail Administration’s project (organization is governmental and leases railway
network), which has an intention to discover the main market entry barriers and market
entry strategies in two European countries, Sweden and Poland. Our aim of the project
is to get better understanding from the entry process, and how governmental
organization could enhance its service towards new entrants of freight market. The
research is conducted by interviewing the company representatives in both of these two
countries. The academic advisor is Prof., PhD Olli-Pekka Hilmola from Lappeenranta
University of Technology, Kouvola Research Unit as well as Dr., Director Miika
Mäkitalo from Finnish Rail Administration.
Sweden opened the railway markets in 90’s and Poland early 2000. Nowadays these
markets have numerous new operators, who have gained significant market shares from
freight market. The objective of the study is to understand the special characteristics of
entering the markets after the railway liberalisation. Your company has a strong
experience in the Swedish/Polish railway markets and therefore Your contribution to
this research is highly appreciated. The interview is important part of the research
project as it gives valuable information how the railway liberalisation affected on the
markets at actor level. Your company’s experiences would help to gather genuine
information.
Appendix 2 / 2 (2)
The interviews will be conducted in Sweden and Poland during February – March 2009.
The interview takes one to two hours. I would appreciate to receive Your confirmation
of interest via e-mail to address [email protected]. Thereafter we can arrange a meeting
for an interview.
Sincerely Yours,
BBA Milla Laisi
Trainee, M.Sc. thesis researcher
Lappeenranta Univ. of Tech., Kouvola Unit
E-mail: [email protected]
Mobile: +358 50 380 5808
Olli-Pekka Hilmola
Prof., Lappeenranta Univ. of Tech. Kouvola Unit, Finland, PhD
Visiting Prof., University of Skövde, Sweden
E-mail: [email protected]
Mobile: +358 40 761 4307
Appendix 3 / 1 (4)
THE SEMI-STRUCTURED QUESTIONNAIRE
COMPANY BACKGROUND
• History
o Any history in the transportation market, e.g. road transports, before
starting railway transportations?
• Organizational chart
o Business background before entering railway freight markets
• The knowledge concerning issues related to market entry before actually
entering the markets
• When entered the markets -> related to market liberalization? (Or so called old
player in some other fields)
ENTERING THE MARKETS
• Before entering the markets
o Why to enter?
ƒ Customer orientation; demand for transportations from
customers’ side
o What kind of preliminary preparations were made?
o Where you gathered the information concerning the market entry?
o Had you heard about the Network Statement?
ƒ If yes, did you use it
ƒ was it helpful
ƒ any information needed missing?
o Did you have rolling stock / other needed infrastructure (warehouses,
terminals)? How you organized it?
ƒ Where you purchased rolling stock and locomotives?
• new / second-hand
o Where you gathered the personnel?
ƒ Previous experience in railway operations
ƒ Qualifications
ƒ Training
o Did you have collaboration with other freight operators, especially
with governmentally owned companies?
• Entering the markets
o What kind of expectations you had before entering the markets? Did
the expectations come true?
o How you entered the markets? Were certain strategies used?
o What kind of problems or difficulties you faced when entering the
markets?
ƒ Especially the role of governmental organizations in safety
certificate and operating license + rolling stock approval +
capacity allocation
o Kindly describe the market barriers.
o What kind of positive matters you faced when entering the markets?
o Resources, employees’ skills and certificates requested by
governmental authorities
o Did you have collaboration with other freight operators, especially
with governmentally owned companies?
• The situation today
o Kindly name the company’s strengths and weaknesses
Appendix 3 / 2 (4)
•
•
•
•
o What are the main problems you are facing?
o How your expenditures are divided between the investments
(terminals, rolling stock, labor)
o Has price level changed during the years?
o Intramodal competition
o Intermodal competition
o Do you have collaboration with other freight operators, especially with
governmentally owned companies?
o Has cooperation with customers changed during the years?
o Do customers require comprehensive solutions (rail transport as part of
industry)
Future
o Do you think some improvements are needed? If yes, what kind of
improvements?
o Kindly name the company’s strengths and weaknesses
o How your expenditures are going to be divided between the
investments (terminals, rolling stock, labor)
o Future prospects; collaboration with other freight operators, especially
with governmentally owned companies?
Traction power: have you faced problems to have electricity contract for other
than diesel traction locomotives (if any)?
o Why this certain locomotive type was chosen?
Were you aware of the special characteristics of railway freight market?
o Surprises?
Objectivity / transparency of the railway freight market
o functionality of
ƒ ministry
ƒ infrastructure
ƒ market requisite
ƒ government (needed documents)
INFRASTRUCTURE
• Kindly describe the railway market in the country
• Did the market liberalization in 2007 have an influence to your business?
How?
• How large rolling stock you have?
• Access charge of railway network
o Amount; how big part from expenditures
EUROPEAN UNION
• Did EU’s treaties (White Papers / Railway Packages) influence your country /
business?
• Market liberalization in EU 2007; did it affect on your company?
o Competition, enlargement plans
• What kind of problems or possibilities EU treaties / laws are creating?
Questions / Porter’s five forces
1. Threat of entry
• Barriers to entry
i. Do you capitalize on economies of scale / substantial
advantage?
Appendix 3 / 3 (4)
•
•
ii. Does differentiation (brand identification, service differences)
play a role in your strategy?
iii. Capital requirements
iv. Switching costs?
v. Access to distribution; networks
vi. Costs disadvantages independent of scale; favorable locations,
government subsidies
Expected retaliation
i. Competitors attitude towards new entrants
Do you have proprietary experience → something what is not available
to competitors and potential entrants through copying, hiring a
competitor’s employees, purchasing the latest machinery from
equipment suppliers or purchasing know-how from consultants or
other firms
2. Intensity of rivalry among existing competitors
• Does the industry face price competition?
• Do you advertise / have “advertising battles” with other companies?
• Do you introduce new products / services in order to compete with
competitors?
• Does customer service play a big role in your business?
• In your opinion, is industry growing quickly?
• Fixed costs play a significant role in railway transportations. Do you
agree? Why?
• Does the industry have diverse competitors? Domestic / foreign?
• In your opinion, does the industry have high exit barriers? (Economic,
strategic, emotional factors that keep companies in business although
possible negative returns)
i. Specialized assets: highly specialized assets to a particular
business or location
ii. Fixed costs of exit: labor agreements, resettlement costs etc.
iii. Strategic relationships
iv. Emotional barriers: loyalty to employees, fear for one’s own
career
v. Government and social restrictions: government denial or
discouragement of exit out of concern for job loss and regional
economic effects
• Have you noticed shifting rivalry, e.g. due to industry maturity /
technological innovation?
3. Substitutes
• In your opinion, what is the main substitute for railway transport?
• Any new transport innovations on the horizon?
Appendix 3 / 4 (4)
4. Bargaining power of buyers
• Do you think the customers have high bargaining power (forcing down
prices, demanding higher quality/more services etc.)?
i. Do the customers concentrate / purchase large volumes?
ii. Does this present a significant fraction of customer’s costs?
iii. Are the services acquired standard?
iv. Does exist numerous switching costs?
v. Do the customers have full information about the market?
5. Bargaining power of suppliers
• Is the market dominated by few companies?
• Is the group of suppliers more concentrated than the industry it sells
to?
• Are you obliged to contend with other substitute products?
• Does a particular industry represent a significant fraction of sales, or
are your customers from various industries?
6. Government
• In your opinion, does the government affect the position of the industry
with substitutes through
i. Regulations
ii. Subsidies
iii. Other means?
• Does the government affect rivalry among competitors, e.g. by
i. Influencing industry growth
ii. The cost structure through regulations
Appendix 4 / 1 (4)
FRÅGEFORMULÄR ENLIGT HALV-STRUKTURELL METODIK
FÖRETAGETS BAKGRUND
• Några erfarenheter av transportmarknaden (ex. vägtransport) innan inträdet på
järnvägsgodsmarknaden
• Affärsorientering innan inträdet på järnvägsmarknaden
• Kunskapsnivå rörande marknadsinträde innan faktiskt inträde på
järnvägsmarknaden
• Inträdet på järnvägsmarknaden -> relaterar till avregleringen av markanden?
(eller så kallade gamla spelare i andra områden)
INTRÄDE PÅ MARKNADEN
• Innan inträdet på järnvägsmarknaden
o Anledningar/motiv till inträdet
ƒ Kundorientering; Kunderna efterfrågade järnvägstransporter
från
o Vilka typer av preliminära förberedelser gjordes?
o Var samlade ni in information kring marknadsinträde
o Har du hört talas om järnvägsnätsbeskrivningen?
ƒ Om ja, har du använt den
ƒ Hjälpte den till i arbetet
ƒ Saknades någon information
o Hade du rullande järnvägsmateriel / annan behövd infrastruktur (lager,
terminaler)? Hur organiserade du det?
ƒ Varifrån köpte du järnvägsmateriel och lok?
• Nya / begagnade
o Varifrån samlade du personalen?
ƒ Tidigare erfarenhet med järnvägstrafik
ƒ Kvalifikationer
ƒ Utbildning
o Har du haft samarbete med andra godstransportoperatörer, särskilt med
statliga företag?
•
Inträde på marknaden
o Vilken typ av förväntningar hade du innan marknadsinträdet? Har
förväntningar besannat?
o Hur genomförde ni marknadsinträde? användes särskilda strategier?
o Vilken typ av problem eller svårigheter stötte ni på under
marknadsinträdet?
ƒ Speciellt statliga organisationer roll i säkerhetsintyg och
drifttillstånd + järnvägsmateriel godkännande +
kapacitetstilldelning
o Vänligen beskriv marknadshindren
o Vilken typ av positiva angelägenheter ställdes du inför vid
marknadsinträdet?
o Resurser, begärde statliga myndigheter in intyg på anställdas
kompetens
o Har du samarbetat med andra operatörer inom
godstransportmarknaden, särskilt med statliga företag?
Appendix 4 / 2 (4)
•
•
•
•
•
Situationen i dag
o Vänligen beskriv ert företags styrkor och svagheter
o Vilka är de största problemen ni möter?
o Hur är era utgifter uppdelade mellan investeringar (terminaler,
järnvägsmateriel, arbete)
o Har prisnivån förändrats under åren?
o Intramodala konkurrensen
o Intermodala konkurrensen
o Samarbetar ni med andra operatörer inom godstransportmarknaden,
särskilt med statliga företag?
o Har samarbetet med kunderna förändrat under åren?
o Kräver kunderna övergripande lösningar (spårbunden trafik som en del
av industrin)
Framtid
o Tror du att vissa förbättringar är behövda?
ƒ Om ja, vilken typ av förbättringar?
o Vänligen beskriv ert företags styrkor och svagheter
o Hur kommer era utgifter vara uppdelade mellan investeringar
(terminaler, järnvägsmateriel, arbete)
o Framtidsutsikter, samarbete med andra godstransport operatörer,
särskilt med statliga företag?
Dragkraft: Har ni haft problem att få ett kontrakt för andra än diesel dragkraft
lokomotiv (om någon)?
o Varför valde ni denna typ av lok?
Var ni medvetna om järnvägsmarknadens särdrag?
o Överraskningar?
Objektivitet / insyn av järnvägsgodsmarknaden
o funktionen av
ƒ ministerium
ƒ infrastruktur
ƒ marknadens förutsättningar
ƒ regeringen (nödvändiga handlingar)
INFRASTRUKTUR
• Vänligen beskriv järnvägsmarknaden i landet
• Har avregleringen av markanden under 2007 påverkat ditt företag? Hur?
• Hur stor rullande järnvägsmateriel du har?
• Banavgiften
o Storlek, hur stor del av utgifterna
EUROPEISKA UNIONEN
• Har EU fördrag (vitböckerna/järnvägspaketen) påverkat ditt land eller ditt
företags verksamhet?
• Har marknadsavreglering inom EU under 2007, påverkade ditt företag?
o Konkurrens, Expansionsplaner
• Vilken typ av problem eller möjligheter skapar EU fördrag och lagar?
Appendix 4 / 3 (4)
Frågor kring Porters fem krafter
1. Etableringshot
• Inträdeshinder
o Brukar ni dra nytta av stordriftsfördelar/väsentliga fördelar?
o Har differentiering (märke identifiering, service skillnader) spelat en
roll i er strategi?
o Kapitalkrav
o Omställningskostnader?
o Tillgång till distribution, nätverk
o Kostnadsnackdelar oberoende av omfattning, goda platser, statliga
subventioner
• Förväntad vedergällning
o Konkurrenters attityder gentemot nya aktörer
• Har ni erfarenheter av äganderätten → något som inte är tillgänglig för
konkurrenter och potentiella deltagare genom att kopiera, hyra en
konkurrents anställda, inköp av de senaste maskinerna från leverantörer
eller köpa kunskap från konsulter eller andra företag
2. Konkurrens mellan befintliga företag i branschen
• Har industrin stött på priskonkurrens?
• Vill du annonsera/ha reklamfejder med andra företag?
• Vill du införa nya produkter/tjänster för att kunna konkurrera med
konkurrenterna?
• Har kundservice spelat en stor roll i ditt företag?
• Anser du att industrin växer snabbt?
• Fasta kostnader har spelat en betydande roll inom järnvägstransporter.
Håller du med? Varför?
• Finns det flera olika konkurrenter i branschen? Inrikes/utrikes?
• Anser du att branschen har höga utträdeshindren? (Ekonomiska,
strategiska och emotionella faktorer som hållar företag i näringslivet krav
trots eventuella negativ avkastning)
o Specialiserade tillgångar: högspecialiserade tillgångar till ett visst
företag eller en plats
o Fasta kostnader för avgången: Löntagaravtal, flyttkostnader osv.
o Strategiska relationer
o Emotionella hinder: lojalitet mot anställda, rädsla för en egen karriär
o Regeringen och sociala restriktioner: regeringens förnekande eller
motverka stänga av oro för arbetslöshet och regionala ekonomiska
effekter
• Har du märkt labil rivalitet, t.ex. på grund av industrin maturitet/teknisk
innovation?
3. Substituten
• Vad är det viktigaste substitutet för järnvägstransporter?
• Några nya transportinnovationer vid horisonten?
4. Kundens förhandlingsstyrka
Appendix 4 / 4 (4)
•
Tror du att kunderna har stor förhandlingsstyrka (tvinga ner priserna, kräva
högre kvalitet och flera servicen och så vidare)?
o Är kunderna koncentrerade/köper stora volymer?
o Är detta en större del av kundens kostnader?
o Är tjänsterna förvärvats standard?
o Finns många omställningskostnader?
o Har kunderna fullständig information om marknaden?
5. Leverantörens förhandlingsstyrka
• Är marknaden dominerad av ett fåtal företag?
• Är gruppen leverantörer mer koncentrerad än industrin den säljer till?
• Är du tvungen att tävla med andra substitut produkter?
• Utgör en viss bransch en betydande del av försäljningen, eller är dina
kunder från olika branscher?
6. Regeringen
• Enligt din åsikt, påverkar regeringen ställningen för industrin med substitut
genom
o Förordningar
o Subventioner
o Andra sätt?
• Har regeringen påverkat rivaliteten bland konkurrenterna, ex. genom att
o påverka industrins tillväxt
o kostnadsstrukturen genom förordningar
Appendix 5 / 1 (1)
INTERVIEWEES IN SWEDEN
Gustavsson, Hans-Åke
Karlsson, Stefan
Rytting, Bo
Segerfelt, Anders
Stenbacka, Hans
Ström, Håkan
Wolf, Hans
Yngström, Lars
Hector Rail
Railcare
Malmtrafik I Kiruna
Green Cargo
Banverket
Tågfrakt
Banverket
Tågåkeriet
Interviewees in Poland & Lithuania
Checinski, Jaroslaw
Hollaway, Timothy
Imieninska, Jolanta
Krawczynski, Lukasz
Losada, Victor Sanz
Losinski, Miroslaw
Niemiec, Krzysztof
Stepniewski, Jacek
Verbickas, Vytautas
Wrobel, Jaroslaw
PCC Rail
Rail Polska
PKP PLK
PKP Cargo
PRKiI / Comsa
Lotos Kolej
CTL Logistics
NZTK
Mockavos Terminalas
PKP PLK
Interpreters
Kędzierski, Krzysztof
Nowak, Magdalena
Taurosaite, Ilona
Lotos Kolej
CTL Logistics
Mockavos Terminalas
Interviewees in Finland
Lipponen, Pertti
Puikkonen, Petri
TR Group
Proxion
Appendix 6 / 1 (1)
SWEDEN
New entrants / freight transport
1. CargoNet AB
2. CargoNet AS
3. DSB First
4. Green Cargo AB
5. Hector Rail AB
6. Ilandsbanan AB
7. Midcargo AB
8. MTAB
9. Peterson Rail AB
10. Railcare Tåg AB
11. Railion Scandinavia A/S
12. Stena Recycling AB
13. SWT Swedtrac AB
14. TGOJ Trafik AB
15. TX Logistik AB
16. Tågfrakt AB
17. Tågåkeriet i Bergslagen AB
Appendix 7 / 1 (1)
POLAND
New entrants / freight transport
1.
4.
5.
6.
8.
10.
11.
12.
13.
14.
15.
16.
18.
19.
20.
21.
23.
24.
25.
26.
27.
32.
33.
34.
35.
36.
37.
38.
39.
40.
41.
42.
45.
47.
48.
49.
CEMET S.A.
CTL Express Sp. z o.o.
CTL Logistics S.A.
CTL Rail Sp. z o.o.
CTL Train Sp. z o.o.
DPNIK DOLKOM Sp. z o.o.
Euronaft Trzebinia Sp. z o.o.
Freightliner PL Sp. z o.o.
GATX Rail Poland Sp. z o.o.
GreenChip Cargo Sp. z o.o.
Hagans Logistic Sp. z o.o.
„Kolej Bałtycka” S.A.
Kopalnia Piasku „Kotlarnia” S.A.
LOTOS Kolej Sp. z o.o.
Lubelski Węgiel „BOGDANKA” S.A.
Nadwiślański Zakład Transportu Kolejowego Sp. z o.o. w Bieruniu
ORLEN KolTrans Sp. z o.o.
PCC Kolchem Sp. z o.o.
PCC Rail COALTRAN Sp. z o.o.
PCC Rail S.A.
PCC Spedkol Sp. z o.o.
POL-MIEDŹ TRANS Sp. z o.o.
Polski Koncern Naftowy ORLEN S.A.
Pomorskie Przedsiębiorstwo Mechaniczno-Torowe Sp. z o.o.
Przedsiębiorstwo Napraw Infrastruktury Sp. z o.o.
Przedsiębiorstwo Robót Kolejowych i Inżynieryjnych S.A.
Przedsiębiorstwo Robót Komunikacyjnych w Krakowie S.A.
Przedsiębiorstwo Transportu Kolejowego „KOLTAR” Sp. z o.o.
PTK i GK S.A. w Rybniku
Przedsiębiorstwo Transportu Kolejowego Holding S.A.
Przedsiębiorstwo Usług Kolejowych KOLPREM Sp. z o.o.
RCO S.A.
STK Sp. z o.o.
Transoda Sp. z o.o.
Zakład Inżynierii Kolejowej Leśkiewicz Kosmala Sp.j.
X-Train Sp. z o.o.
Appendix 8 / 1 (1)
COMPANY DETAILS SWEDEN
Company
City
Internet page
Bantåg Nordic AB
Skelleftehamn
http://www.railcare.se/?p=bantag
Malmtrafik i Kiruna AB
Kiruna
http://www.lkab.com
Tågåkeriet i Bergslagen AB
Kristinehamn
http://www.tagakeriet.se/index.html
Malmö Limhamns Järnvägs
AB
Danderyd
www.cementa.se
Ofotbanen Drift AS
Narvik
http://www.ofotbanen.no/
MidCargo (BK Tåg AB)
Nässjö
http://midcargo.se/
CargoNet Sweden
Stockholm
www.cargonet.se
Falköpings Terminal AB
Falköping
Green Cargo
Solna
http://www.greencargo.com/
Hector Rail AB
(Head office)
Danderyd
http://www.hectorrail.com/
Taastrup
www.railion.dk
Railion Scandinavia (Head
office)
(DB Schenker!)
Skövde–Karlsborg Järnväg AB
Falköping
TGOJ Trafik AB
Eskilstuna
http://www.tgojtrafik.se/
TX Logistik AB
Malmö
http://www.txlogistik.eu
Veolia Transport Sweden
Solna
http://www.veolia-transport.se
Tågfrakt AB
Falköping
http://www.tagfrakt.se/
Appendix 9 / 1 (1)
COMPANY DETAILS POLAND
Company
City
Internet page
Rail Polska Sp. Z o. o.
Warsaw
www.railpolska.pl
PKP Cargo S.A.
Warsaw
http://www.pkp-cargo.pl/
PKP Linia Hutnicza
Szerokotorowa
Zamosc
http://www.lhs.com.pl/
CTL Logistics
Warsaw
http://www.ctl.pl/index_en.php
Euronaft Trzebinia Sp. Z
o.o.
Trzebinia
http://www.euronaft-trzebinia.pl/
Freightliner PL Spółka z o.o.
Warsaw
http://www.freightliner.co.uk/default.aspx?PageID=54
LOTOS Kolej Spólka z o.o
Gdańsk
http://www.lotos.pl/en/korporacyjny/grupa_kapitalowa/lotos_kolej
Orlen Koltrans Sp. Z o.o.
Plock
http://www.orlenkoltrans.pl/
Nadwislanski Zaklad
Transportu Kolejowego Sp.
Z o.o.
Wola
http://www.nztk.pl/
PCC Rail S.A.
Jaworzno
http://www.pccrail.pl/
PTKiGK S.A.
Rybnik
http://www.ptkigk.com.pl/
Pol-Miedz Trans
Lubin
http://www.pmtrans.com.pl/
Wroclaw PRKiL S.A.
Wroclaw
http://www.prkii.com.pl/
Kalisz
http://www.skpl.kalisz.pl/main.shtml
Stowarzyszenie Kolejowych
Przewozów Lokalnych
SKPL Kalisz
Transoda Sp. z o. o.
Kolej Baltycka S.A. (Baltic
Rail)
oraz Heavy Haul Power
International and Consulting
Sp. z o.o.
Sarkom
Miniskipas
Ínowroclaw
Szczecin
http://www.hhpi.org/
Olesnica
http://www.sarkom.wroc.pl/
Vilnius,
Lithuania
http://www.miniskipas.lt/naujienos
http://www.achemosgrupe.lt/apiemus-en.html
PUBLICATIONS OF THE FINNISH RAIL ADMINISTRATION, Series A
1/2007 Akselipainon noston tekniset edellytykset ja niiden soveltuminen
Luumäki–Imatra-rataosuudelle
2/2007 Radan kulumisen rajakustannukset 1997–2005
3/2007 Marginal Rail Infrastructure Costs in Finland 1997–2005
4/2007 Ratarakenteen kuormituksen määrittäminen stabiliteettitarkasteluihin
5/2007 Pohjois-Suomen rataverkon tavaraliikenteen kehittäminen
6/2007 Suomen rataverkon tärinäselvitys.
Kirjallisuuskatsaus ja tärinäkohteet vuosina 2000–2006
7/2007 Luvattomien radanylitysten välttäminen
8/2007 Maatutkatekniikan hyödyntäminen radan tukikerroksen kunnon arvioinnissa
9/2007 Markkinoilletulo ja rautatiemarkkinoiden muutos kotimaisen tavaraliikenteen
avautuessa kilpailulle Suomessa
10/2007 Rautatieliikenne 2030 -suunnitelman liikenne-ennusteet
11/2007 Logistiikkakeskusten tie- ja ratayhteydet
1/2008 Aikataulusuunnittelu ja rautatieliikenteen täsmällisyys
2/2008 Rautatieliikenteen simuloinnin merkitys ratakapasiteettihakemusten
yhteensovittamisessa
3/2008 Rautateiden liikkuvan kaluston kunnon valvonta runkoverkolla
4/2008 Raakapuukuljetusten tulevaisuuden haasteet
5/2008 Perussolmuratapihojen merkitys ja näkymät osana kuljetusjärjestelmää
6/2008 Tasoristeysten kansirakenteet
7/2008 Ratojen alusrakenteissa käytettyjen materiaalien routimisherkkyys
8/2008 Kolarin seudun kaivoshankkeet
9/2008 Rataverkon pohjavesialueiden riskienhallinnan kehittäminen
10/2008 Rautatieliikenteen pitkän aikavälin suunnitteluprosessin kehittäminen
11/2008 Rautatieliikenteen häiriöiden analysoinnin kehittäminen
12/2008 Junan pyörävikojen havainnointi raiteeseen asennetulla mittalaitteella
13/2008 A Collaborative Process of Product Lifecycle Management for Railway
Signalling Infrastructure
14/2008 Rataverkon jatkosähköistyksen hankearvioinnin päivitys
15/2008 Rautatieliikenteen täsmällisyyden mittaaminen
16/2008 Ilmastonmuutokseen sopeutuminen radanpidossa. Esiselvitys
17/2008 Kehäradan kiintoraideselvitys
18/2008 Rautatiekuljetusten riskienhallinta. Esiselvitys
1/2009 Rataverkon kunnon ja sen liikenteellisten vaikutusten visualisoinnin
lähtökohdat
2/2009 Sähkömagneettisten kenttien kartoitus Ratahallintokeskuksen hallinnoimalla
rataverkolla
3/2009 Ratahallintokeskuksen tutkimus- ja kehittämisstrategia
4/2009 Raakapuun terminaali- ja kuormauspaikkaverkon kehittäminen
5/2009 Nopean junaliikenteen kehittämisen vaikutukset. Kirjallisuustutkimus
6/2009 Junaliikenteen informaatiokeskuksen toimintatapa. INTO-hanke
7/2009 Esiselvitys akseli- ja metrikuormien korotuksen yleisestä teknistaloudellisuudesta ja case-tarkastelu Kemi–Kolari-rataosalla
8/2009 Etelä-Suomen kauko-ohjausjärjestelmän (ESKO) käyttöönotto ja muutokset
liikenteenohjaustyössä
9/2009 Olemassa olevien ratapenkereiden stabiliteetin laskenta
elementtimenetelmällä
10/2009 Matalat meluesteet raidemelun torjunnassa
ISSN 1797-6995
ISBN 978-952-445-302-8
www.proinnodes ig n.fi 2009
Publisher:
Finnish Rail Administration (RHK)
PO Box 185, Kaivokatu 8, FI-00101 Helsinki
tel. +358 (0)20 751 5111, fax +358 (0)20 751 5100
www.rhk.fi/english